Many business owners have to call it a day when they pass on. This is not a surprise as business owners normally spend the bulk of their time running the business, rather than thinking about the sustainability of the business when they are no longer at the helm.
The following are the 4 common mistakes business owners make that will negatively impact their business, should they pass on suddenly or become, unable to run the business due to disablement or critical illness.
The business owner does not have a handover plan to determine the people who will make business decisions when the business owner is absent. The consequences can be very serious, especially with Sole Proprietorships as the business will come to a halt if the business owner passes on suddenly.
If the beneficiaries (Spouses or Children) do not know how to run the business or are not interested in running the business, the business could go downhill from there, undoing all the good work the business owner had spent his/her lifetime building.
The business owner may have the plan to hand the business to key staff members. However, the key staff may not have enough cash to buy over the business, especially if the beneficiaries want to cash out.
What’s worse, disinterested beneficiaries may want to liquidate the business. All these set the staff and the beneficiaries on a collision course.
The business owner is the one who knows how to create the value of the business. He is the one who has strong business relationships with key customers and strategic suppliers. The know-how and business relationships will most likely be weakened or diminished when the business owner is no longer around. In other words, the value of the business diminishes or cannot be preserved when the founder or the business owner passes away.
Business Succession Planning is a very important estate planning aspect for business owners if he or she wants to preserve the business which they have built up over the years. It is important to plan the business succession by handing over your valuable business to family members or key staff who will at least maintain the business, if not take it to new heights. Life is unpredictable and we never know what will happen tomorrow.
Speak to an experienced estate planning professional to understand more about how to preserve the value of your business and how to develop your business succession plan. Improper planning or no planning of your business succession can bring disastrous consequences to your beneficiaries, your employees and your business partners.
Kenny Loh is a Certified Estate Planning Consultant and also a CERTIFIED FINANCIAL PLANNER (CFPTM). He specialises in Holistic Estate Planning, using a unique “3-in-1 Will, LPA and Standby Trust” solution, to address his client’s social consideration, legal obligation, emotional needs and family’s harmony in his approach. Kenny has Double Master degree in Business Administration and Electrical Engineering, and also an AEPP (Associate Estate Planning Practitioner) jointly awarded by The Society of Will Writers & Estate Planning Practitioners (SWWEPP) of The United Kingdom, in collaboration with Estate Planning Practitioner Limited (EPPL), the accreditation body for Asia.
Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
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