What happens to business value when you die? If you’re the CEO of a publicly traded company, stocks typically drop. Investors see risk and volatility and decide to get out before things go sour. If you’re the owner of a privately held business, your entire legacy could evaporate.
A sudden death or disability can wreak havoc on your business. Who takes over and makes decisions in your absence? Will employees know what to do? Will customers have confidence that your company can meet commitments? Will lenders?
No one likes to think about issues like death and disability, planbut planning ahead is a way to protect continuity and preserve value. It’s a way to ensure that everyone who depends on your business can continue depending on it after you’re gone.
Here are some of the things that could go wrong but could be avoided with proper planning:
- Business performance declines while family members and employees try to sort out new roles.
- Employees leave the business rather than risk an uncertain future, straining customer relationships and business value.
- Customers may switch vendors, not knowing if your company can continue to deliver on commitments.
- The business may default on contracts and owe penalties.
- Banks may call in loans or terminate lines of credit due to uncertainty and a fiduciary responsibility to their stakeholders.
- Long-term, trusted employees may not receive the kind of severance pay you would have wished.
- Family conflict and litigation may ensue.
- The business may have to be liquidated or sold at a bargain value.
If the worst happens, your business needs to be ready to react almost immediately. Without a plan, your spouse or family members may flail around in uncertainty, mourning your loss while learning how to oversee a business. Perhaps worse yet, the courts may appoint someone to take charge, running your company with no idea of your wishes.
Talk to your attorney about continuity plans that protect your company value and legacy. Without a plan, you leave behind cost, confusion, stress and anxiety. With one, you show a distinct level of care and courtesy for everyone who counts on you today.