What Happens To My Business After I Die
The other night whilst watching the news, a life insurance advertisement came onto the television. It was an unsurprising 35 seconds of a couple in their 60’s worrying about what would happen to their kids upon their passing. This got me thinking, most media surrounding death relates to preparing a will, or as in this case – life insurance. But what happens to your business after your die? Would this baby you’ve spent years of blood, sweat and tears building, simply grind to a halt? Get dismantled? Or would your family/partners continue to operate it according to your wishes?
So I did some research.
The term for planning a death as a business owner is known as ‘succession planning’, and it is vitally important that you put in place the correct procedures to ensure that your business is able to stay afloat when you’re gone. As explained in detail below, succession planning includes making sure you keep a detailed diary of future plans for your company, a pass to allow others to access your emails and important documents, an operations manual about how to run your company and perform your job, and lastly a plan to make sure staff don’t experience job security worries.
Start-ups & Small Businesses
Start-ups & Small Businesses
If your business is yet to become profitable, or is still in the early days of its operation, one simple possibility is to name a successor for after you pass away. This person is going to be someone you trust and can be anyone from a family member, to a business partner or an employee. In Australia, you’ll need to value your business often as this assists with the succession planning, and you’ll also need to specify if you will be gifting the business or selling it. An advantage of this for a start-up business is that you’ll be able to gift the business to someone without incurring a tax penalty. However, it is important that you nominate someone who is readily available for that amount of responsibility, and who you’re confident will continually operate your business in the same spirit as you originally intended. As your business grows, you’ll want to look at some other options.
Unless you intend to pass down your company to a friend or family member – one who is well equipped and prepared for this responsibility – A better option for a well-established and profitable business might be to sell the business whilst ensuring your loved ones retain a share of ownership. This option takes the responsibility of running the company day-to-day off your loved ones’ hands, whilst still allowing them to profit. Larger companies have the funding to ensure that there is an in-depth approach to guarantee the successor has industry experience, training and most importantly is able to create an effortless transition. The process will be a little more costly and lengthy, but will ensure that your business continues to run smoothly should you pass away.
Whatever You Do – Make A plan so that you avoid a probate
When you pass away, business partners, colleagues, family and friends will be mourning your death – so you don’t want to leave them picking up the pieces especially as it can be avoided.
Succession planning allows you to avoid the process of a probate – a legal proceeding required to validate the latest Will of a deceased person. If your Will is outdated, you are leaving important business decisions in the hands of a representative.
A probate is a headache. It can take months or sometimes years to process, during which your business is in the hands of a person that has little discretion in handling certain assets, and business profits have been known to decline exponentially as a result of the cost of the probate process.
Although it may seem overwhelming, there are many step-by-step guides and checklists available to help you best prepare a succession plan. Here are a few good resources to get started:
Ensuring your company continues to operate if you pass away.
As a business owner your brain is invaluable, holding your future ideas, plans, passwords, and the day-to-day ‘know how’ to ensure continuous success and growth… to say the least.
Let’s assume you are similar to most business owners, and you have this information stored on your phone or your computer. Maybe you prefer a paper diary, where your daily scribbles are barely legible to your other half.
Now let’s pretend that yesterday, you lost the ‘life lottery’ and were struck by lightning – sorry to be the bearer of bad news but, you didn’t make it.
How does your successor pick up day one? Where do they begin at such short notice? What tasks are most important to you, right here, right now, day one of your passing. Will it be emails? Alarm codes? Keys? Instructions? or perhaps simply supporting your employees?
Hopefully, this illustrates just how much you personally underpin your business.
The good news is that there are a few precautions you may take to ensure whoever has to take over, knows what’s happening and can hit the ground running!
- Keep a daily journal of tasks and upcoming plans – even if it’s just in your calendar. This super simple task which you probably to some degree or another do already, will really help your successor.
- There’s no point putting anything down in writing if the intended recipient can’t access it. So keep a record or essential details that are required to operate the business, and write them down. This can include passwords, account numbers, client contracts and more.This should be in a secure place. For more information, see our article here.
- Create and maintain an operations manual (see below).
An operation manual is your Encyclopedia for your business. Think of when you first bought your car – it came with a pocket size leather case perfectly placed in the glove box… and sitting within – your car manual. Your car manual is your personal receptacle of information that is not easily remembered or accessible should anything go wrong when on the road. Traditionally for a business, a simple binder folder works well, with tabs for easy access to various components of your business. Here you should include every process for all tasks that make up your day, alongside your important contacts and security details.
For more modern businesses, we are spoilt for choice. If your business contains a lot of computer based processes, you can use programs such as QuickTime’s screen recorder (for Mac users), or OBS Studio (for Windows users), to record your exact process – including all clicks and audio from your microphone. Those of you who use virtual assistants or train lots of staff will be very familiar with this process.
Most importantly however, no matter what medium you choose to use, you will need to make sure you are able to update the manual often. Not only because security companies recommend you change passwords every 6 months (particularly due to the number of transitioning staff members), but because it would be a logistical nightmare if your successor referred to the manual only to find outdated information, with no way to contact you for help. Further, processes can easily change if your software or CRM is updated (a common occurrence), meaning new step by step guides will need to be adjusted.
A simple reminder on your phone, or 6-month-repeated event in your calendar will be enough
PSA: The business.vic.gov.au website has a manual template that you can use for a guide.
Prepared.ly is an online portal that allows you to safely store all the nitty gritty’s explained above. Think of an online safe, that allows your successor to receive any information you decide to input (files, documents, passwords, notes and plans of future ideas) and editable via a click of a button. Once prepared.ly is notified of your passing, the information is automatically sent to your successor… never a need to worry again, your lifejacket to ensure your information is received and your legacy can continue on. The beauty of prepared.ly is that its discriminate delivery (each person only receives what you assign them). You’re in complete control assuring the people you nominate to run your business are receiving the information you decide is required to continue on.
Managing Relationships After You’re Gone
Your staff members are the cogs in the engine of your business’s success, and I’m sure you care about them as much as your business. When you pass away, they will immediately experience a fountain of emotions. Not only regarding the loss of you as a person, but also concerns over job security. This must be carefully controlled in order to avoid the “flee the sinking ship” mentality that will kill a business faster than anything else.
Ideally, your successor should have access to an operations manual (including staff data and management files) in the event of your passing. Your staff members, especially if working in a smaller environment, will be distressed, shocked, and saddened when handling their grief. Your successor should be informed privately, before announcing it to the rest of your team. The office morale will naturally drop, causing a low energy from within and interrupting workflow and efficiency.
Your succession plan should include the support of your staff members, which hopefully is on offer to staff currently, should they experience an unexpected event. Ensure your successor emphasises job security, dedicates funds toward bereavement counsellors, Employee Assistant Programs, provides extra mental health days and shows that your company cares about mental health. By having a plan, your successor will be able to pave a path toward a new normal.
As grim as it sounds, there are going to need to be pretty imminent changes to your business should you unexpectedly pass. You’ll need to ensure your successor can remove your belongings from the office back to your family (saves the constant reminder of your absence!), diverts your emails to a new account, re-organises your website, business cards and so on. Thinking and planning ahead sets your business up for success by planning how you would like your business reorganised if you’re no longer able to run it. Further, development of a succession plan should plan for your staff members, whilst considering the cost to your business if you were to lose them. Creat a document of talent profiling within your organisation and organise how you would restructure their roles and responsibilities in the event of your death. Compensation alone will not be the sole motivator for employees to stay, looking out for their career pathways and having a plan for talent development will aid in employee retention.
It is paramount for the continual success of your business that you have an action plan in the event of your passing. Risking no plan will cost you at the expense of your business, what you have worked so hard to successfully grow. There are many corporate succession planning businesses that can help you develop a strategy to guarantee investment for new owners. However, there is so much more to consider. Death is not a pleasant thought, but we are yet to be invincible. It’s paramount to set up your business future for success, an online portal such as prepared.ly has made it possible for your information to be securely encrypted, until it is to be passed on when you have. Lastly, developing your succession plan includes supporting the future of those that have worked for you. Grief is the most difficult emotion to endure, so preparing your business for those to continue will aid in simplifying the process when you are no longer around.