What would happen to your business--and its value--if suddenly you were no longer there?

I hope you've implemented a plan. If you haven't and suddenly become incapacitated or die, your company can be destroyed. The same can happen due to your retirement--especially if it's prematurely and involuntarily caused by an illness or injury.

Take these two important steps now to protect your company:

  • Create a formal, written succession plan.
  • Buy "key man" insurance (disability and/or life insurance) on yourself and all other crucial employees whose sudden loss could hurt the company financially.

The first step involves designating immediate successor(s) in the event you suddenly die or suffer a catastrophic disability. The plan must ensure that your normal business operations could continue without major interruption. It increases your company's overall stability, averts disputes about leadership when you're gone, and protects your legacy. Talk to your partners (if any) and attorney about drafting a formal succession plan.

My firm has had a continuity plan in place for years. For example, each of our planners maintains records of every client meeting and conversation, not only to help them manage their caseload, but also to provide context for a successor planner should a transition become necessary, whether caused by a planner's vacation (happens a lot), retirement (which has happened a few times) or sudden death (which, sadly, has happened once).

If you don't have such a plan, develop one to cover eventualities such as these, as well as others that are specific to the type of business you're in.

Insurance is important, too, because most companies don't have sufficient liquid assets to keep the business going while also recruiting successors. Life insurance provides cash to the business so it can keep operating.

If you die, your equity in the company will likely pass to your spouse or children. But does your spouse want to operate the company? Will the remaining executives or partners want your spouse involved? Life insurance provides the company with cash it can use to buy out your heirs--everyone wins.

If you haven't taken these two critical steps, do so now. Life-changing events have a way of occurring without notice.