Believe it or not, it happens. In fact, far more often than you would think.
Research shows that not more than 30% of private company owners have spent any time developing an exit plan. Or, in the alternative, a family transition plan.
What happens if you die unexpectedly? What happens to your business? To your employees? To your family.
I can tell you, it very often does not work out well for anyone involved.
Here are two recent, real-world examples.
A sole proprietor of a retail and B to C landscaping business in a small town about an hour away died unexpectedly. He had no exit plan. Worse, like most small company business owners, he had no strong number two manager. He’d spent no time or money investing in training a successor or, even someone to be a secondary keeper of business knowledge and process.
He and his wife had been married for nearly 40 years and had one daughter. His wife had never worked in the business and his daughter was a successful and tenured senior manager in a multi-billion dollar company. Plus, she was on the fast track for further advancement.
And, then, her father died. Her mother was inconsolable and had no experience in the business world. His daughter was forced to quit her job, spend countless hours away from her home, husband and two young children for nearly 18 months while she worked in her father’s business to help her mother wind the business down, liquidate inventory and close it.
With all the knowledge and customer relationships dying with the owner, the business had no value. His wife walked away with nothing. His daughter sacrificed her career. His employees all lost their jobs.
All for the lack of any kind of advance exit and succession planning.
A man spends over 20 years building a heating and air condition repair and installation business in a major Midwestern city. He grows his business to include 10 men and company 10 trucks working for him from his leased corporate headquarters.
Again in this case, the business owner died suddenly. He had no exit plan, no succession plan and no one else who knew anything about running the business. Or, who even had access to his books and records other than his bookkeeper.
His 10 employees came to work as usual one morning. But, the boss was a no show. After some time, they learned that he had died. They were directionless. And, they were no longer motivated to work because they had no idea whether or not they would continue to get paid.
Again, the grieving wife, with no business experience much less HVAC repair and installation experience, was forced to take over the business. Or, in this case, what was left of the business. In no time at all, 2 of the former employees left the company, took the customers that they had relationships with and formed their own company.
The end result, once again, was a company with no value so the man’s wife was left with no wealth creation outcome from a business her husband had spent decades building. And, she was forced to deal with a failing business that she knew nothing about while dealing with the sudden loss of her husband.
The upside to a well-structured exit or transition plan is extraordinary in both a reduction of the potential emotional toll on your family, the protection of employees and your business legacy and the ROI on enhanced business valuation.
The commitment in time and the modest expense combine for an incredible business value.