When it comes to your business, you are always thinking about what’s next. You are thinking about what the next week, the next month, the next year will bring. You have your ten-year plan, your goals, your targets. What you may not necessarily have thought about is what is going to happen to your business when you are gone. What is the future of the company that you have created when you are no longer a part of it?
The last year and more have shown us all how important it is to plan for the events that we would rather not think about. We have seen businesses struggle and fold under bankruptcy. We have seen good people lose their jobs and struggle to pay their bills. We have seen friends and family members lost because of COVID-19. There are always going to be events that are terrible and unexpected.
What we can do is be responsible and undertake financial planning as best we can, to ensure the future health of our loved ones and the businesses that we have built. That is why it is so important to have a legacy plan for your business. If you want to know where to start, read on.
Start thinking about the future now
You have already taken the first step of this point by reading this article, but it is important to stress just how crucial early planning can be in securing the legacy of your business. Think about where you want your company to be in the years to come, and start thinking about the ideal scenario that you would leave it in.
If your business is a family one, who would you want to take over? If not, is there a business partner or colleague that you hope would assume leadership? Of course, the plan may change over time but having a basic framework will make a difference. And remember, this isn’t just for the worst-case scenario, this is for your retirement too.
Give your staff the tools they need
Many business owners are the kind of people who want to do everything themselves. They take pride in the fact that they built and launched their companies and took them to success upon success. But when you are thinking about your legacy, you need to think about the smoothest transition possible. That means that you need start creating the framework for your business to run without you at its highest possible level. Is it time to start more employee training? Is it time to start sharing some responsibilities?
Do not skip insurance
There are many reasons why having a legacy plan is a good idea but providing a cushion in case of shareholder death is one of the most important. We have all seen just how fragile a lot of businesses can be over the course of the pandemic, and the lack of a formal shareholder agreement in the event of a business owner’s death is the kind of turbulence that some companies may not be able to fly through.
Shareholder Protection Insurance is an invaluable cover that allows companies to keep operating in a worst-case scenario. If said shareholder dies or suffers a critical illness, the insurance pays out a lump sum. This would allow the remaining shareholders to buy that stake in the business. Without a clear plan or insurance policy, there are so many opportunities for control of the business to be lost, or for an unwelcome partner to grab a controlling or significant interest. Drewberry Insurance can take you through more of the advantages of Shareholder Protection Insurance and has broken down the cost of cover based on age.
Prioritise financial transparency
We have all heard about those situations where a new owner inherits a business only to discover a mess of debt, improperly filed receipts, invoices and returns, and a nightmare that takes more time, money and effort to resolve than the company is worth. The best business books tend to encourage excellent due diligence when performing a merger or acquisition.
If you want to ensure that your company is going to be secure after you have left, then you need to make sure that your finances are in order. It is well worth bringing on a financial advisor to help you get to grips with any outstanding and ongoing issues and ensure that your successor is part of the conversation.
Know when you’re done
Finally, one of the most important parts of establishing a solid legacy plan for your business is to think about what you want, personally. Think about when you think you will be ready to step aside and start making plans for what you are going to do afterwards. Having an exit strategy helps you to know when you have achieved your goals with your business and when it’s time to hand over the reins to your successor.
There’s a lot of discussion about early retirement in the UK right now, but wouldn’t you rather do it on your terms?