What Events Does a Succession Plan Deal With?
A Business Succession Plan is designed to pre-agree a commercial and legal strategy that deals with disruptive or catastrophic events that could require or result in the exit or departure of a Proprietor from the Business in the future.
Involuntary Events
- Some events, like Death, are inevitable.
- Other events like Disability or Trauma are health events that are possible rather than probable.
- Some Advisers call these Involuntary Events, because they happen to you, whether you like it or not (rather than you causing them to happen).
- The only question is whether the Event will happen while you are still in Business (i.e., before you Retire).
- Many Involuntary Events (like Death, Disability and Trauma) are Insurable Events.
Voluntary Events
- Other Events, like Retirement, are Optional or Voluntary Events.
- We can cause them to happen, by making a decision to Retire (even if the decision was motivated by illness, exhaustion, distraction or loss of interest).
- Most Voluntary Events are not Insurable Events.
Retirement, Illness and Death
- Obviously, the most desirable way to exit a Business is to Retire rather than die.
- It's better to leave on your feet (rather than on your back)!
- Many people have fixed ideas about when they would like to retire and sell their Equity in the Business (particularly if they have Business Partners who want to purchase their Equity).
- To achieve their goal, they have to find an appropriate Purchaser who is prepared to ready, willing and able to pay the desired Purchase Price.
- On the other hand, many people can't imagine Life after Business and envisage themselves "dying in the saddle".
- If you're never going to Retire, it is obviously more important to have a Plan that deals with your Death (or an Illness that forces the Proprietor to exit the Business) (each of which could be an Involuntary or Insurable Event).
- However, ultimately, you and your Partners need a Succession Plan for Retirement, Illness and Death.