Businesses with a sole owner range from the local pizzeria to multi-billion dollar enterprises. What will happen to the business in the event of the premature death or disability of the owner?
In the case of very small businesses which are wholly dependent on the efforts of the owner, the answer is the business will close. In the case of large businesses, there is a highly developed management team that can insure the continued operations of the business. But what about businesses in the middle, say with revenues in the range of $2MM – $50MM that are highly dependent on the efforts of the owner/operator?
Most, if not all, business owners have been approached with the question, “What would happen to your family or business if you died or became disabled?” Few business owners fail to recognize this question for the thinly-veiled pitch to buy insurance that it is. Our goal is not to discourage you from buying life or disability insurance. Far from it. Purchased in the proper amounts and for the correct reasons, life and disability insurance proceeds will help your family and business survive your sudden absence. Insurance alone, however, cannot resolve all of the issues that face every business when owners go AWOL.
In the event of the owner’s temporary disability (e.g. 6 months) or death, the problem is to prevent the dissipation of the business value in the owner’s absence. In these circumstances with no continuity plan in place employees often feel they can’t carry on without the owner. Rather than “step-up” to keep the business going, employees will often start looking for new jobs. Once a few important employees leave, the business probably can’t be saved. The planning goal here must be to preserve business value until either the owner can return or the business can be sold. Insurance can replace the value of the business to the owner’s family, but why let the business value disappear unnecessarily?
Business owners spend years creating business value. Our goal is to find innovative strategies to preserve that value for owners and their families before a tragedy occurs. Because all businesses are unique, the strategies vary. As always, I am a phone call or email away to discuss the best way for your business to handle unforeseen circumstances.