Have you planned for when you will not be at the helm of your business anymore? No? Well, join the majority of business people who have not yet gotten round to it.
All the answers to your unique business lifestage questions
It’s important to plan for the future; whether you are either retiring from your business of if you pass away unpredictably. But, not surprisingly, many business people leave it on the ‘To-do’ pile on their desk. Then it catches them, their family and the business off guard.
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There are two possible futures that you should consider, and prepare for, and each one needs individual attention:
1. Passing away unexpectedly
You have to consider the impact of your death on your two ‘families' – business and personal. On the one hand, your contribution to your household could dry up. On the other hand, if you have not planned for succession, your business may pass on with you.
To protect your family, and partners in the business, consider taking out life insurance as well as cover for your business partner(s). This money should be used to allow your business to buy your share from your family or, if your family will continue in the business, to provide cash flow to the business during the disruption that follows your death. Do not confuse this life insurance with the insurance you take out to look after your family after your death, you should have both.
2. Planning for when you leave your business
Consider this conundrum; a new client now finds himself in: Throughout a very successful career as an entrepreneur he re-invested as much money as he could back into his business. Now, upon retirement, he hands a very profitable business to his sons.
But as he prepares for retirement, he realises that he never planned for retirement outside his business success, and now he has to turn to his sons to pay him from the business’s profits, just so that he can retire in comfort.
This is not ideal and can be even worse if later, his sons prove incapable of managing the business profitably or the economy turns in such a way that the business cannot look after him, as has happened to many suppliers in the mining industry, for example.
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It’s never a pleasant topic to discuss and there are always ‘more urgent matters’ to attend to. But, take a second and consider your effort in building your business, and what your death or retirement could do to the business’s success and your livelihood.
With this in mind, make sure to schedule some time to meet with a certified financial planner, to make sure your legacy lives on, regardless of what happens to you.