Succession & Continuity
What happens to the business if you're sick, injured or out for months.
Notes from Randall Harper. Thirty years working alongside owner-operators, executives and boards — companies of all types and sizes — across entertainment & media, hospitality, service based business, lifestyle businesses, financial services, retail and not-for-profit, in Australia, Asia, the United Kingdom and the United States. What follows is the thinking I keep returning to.
The conversation owners avoid
Most owner-operators have not seriously thought through what would happen to the business if they were unable to work for three months — let alone what would happen if something happened to them permanently. It is an uncomfortable conversation, and exactly because it is uncomfortable, almost no one has it until it is forced on them. The owners who do have it find that the planning itself often makes the business stronger, regardless of whether the contingency ever arises.
The three scenarios to plan for
- Short-term incapacity — sick, injured, or otherwise unable to work for weeks or months.
- Long-term incapacity — unable to return to the business at all.
- Death — what happens, who is in charge, how the business and family are protected.
The continuity document
Write a single document — kept somewhere your partner, family, or a trusted second can access — that contains everything someone would need to run, sell, or wind down the business in your absence. Bank details, key supplier contacts, customer obligations, software logins, insurance details, accountant and lawyer details, current contracts, outstanding obligations, what to do first. Most owners assume this lives in their head; the assumption only holds while their head is available.
Insurance to protect the family
Key person life and total-and-permanent-disability insurance — paid by the business, covering the owner — can be the difference between the family losing the business value entirely and being protected. The premiums are modest relative to the protection. The conversation with a financial adviser to set this up properly is one of the most important an owner can have, and one of the most commonly deferred.
Building a sellable business is the same as building a survivable one
Many of the things that make a business sellable — documented processes, reduced owner dependence, recurring revenue, a competent second-in-command — are the same things that make it survivable in a crisis. Working on these is not pessimism; it is realism. The owner who has built a business that could run for three months without them has built something genuinely valuable. The owner who has not has built a job that ends when they do.
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The contents of this paper are the opinion of Clear Point Advisory only. Readers should rely on their own judgement and obtain professional advice appropriate to their circumstances.