Succession
I've been thinking a lot lately about transition and succession in my business.
Our country has a well-worn, proven plan in place for a smooth change of leadership at the top of our executive branch of government. But, what about in our businesses? More specifically, mine. Do I have a well-laid plan (or any plan at all) for what happens next?
What if I decide I want to retire? What if my business partner decides to take on other business activities, and wants to sell his share of the company? What if the worst case happens and one of us dies? The first two (retirement and divesting) are relatively easy. They generally come with enough planning and time to address on an as-needed basis. But death…too often it’s sudden or unexpected. And not planning for it can mean more than the death of the person, it can lead to the death of the business, too.
If one of the two leaders of the company suddenly stops leading, how does the company go on? How does it survive? These are deep, heavy thoughts and they’ve been weighing on me for a long time now.
I didn’t always feel this way, or think like this. But as COVID-19 got serious here in the US, it dawned on me that at any moment, any one of us could be taken down by this virus.
But starting to think about this because of COVID was, frankly, naive. Life is unpredictable, it’s fragile. It’s just easier to get through the day (the week, the year) when you’re not thinking about how easily it could all be over.
I realized it was time to take the proverbial bull by the horns and deal with all of these big, scary questions.
If I died tomorrow what would happen to my team?
If I died tomorrow how would the business go on?
If I died tomorrow what would happen to my family?
Because this isn’t just about me and my family, that’s what life insurance is for. It’s about all of the families that rely on Ad Zombies as a reliable source of income. It’s about making sure that the company doesn’t fall apart if someone in a key leadership role is suddenly gone.
It turns out that avoiding this conversation (and decision) was more painful than actually doing the job.
Brandon and I spent a good portion of a recent lunch meeting discussing the right path to dealing with the aftermath of an unexpected death of either of us.
We decided to execute Buy/Sell agreements to allow for a clean transition. In our case, the surviving business partner essentially buys the percentage of control from the other partner with life insurance policies the company provides. This does require establishing (and agreeing upon) the value of the business, of course, and the amount that leaves the deceased partners spouse in good shape.
We chose this path because it eliminates the potentially difficult challenge of integrating a new partner into the company: the spouse of the dead partner stepping into a totally new role in the midst of dealing with grief and loss. To eliminate this pain point, the Buy/Sell agreement pays the surviving spouse a lump sum of cash. They essentially exit the business and go on living life and don’t have to think about the hassle, the headache, or filling the shoes of either partner.
This may seem like a heavy topic, but it doesn’t have to be. Actually making the decision was quite unemotional for me. We are all going to die. There are going to be changes in all of our lives, planned or otherwise. But not preparing for the inevitable is stupid.
It's a mistake that’s especially easy to make in a small business, where doing tends to trump planning. But every small business across the globe, whether you make $100,000 a year or are a multi-million dollar company, needs to have a succession plan in place.
What's yours?