What would happen to your business if you or another key executive were to die unexpectedly? A successful entrepreneur shares what he learned from the death of his long-time friend and business partner.
Death is an unsettling topic for many people, and it’s not a subject that most entrepreneurs take into consideration when building a business. As difficult as it may be, have you thought about what would happen to your business if you, your partner or a key member of your executive team were to die?Planning for the possibility now will save you and your colleagues a lot of emotional pain and financial uncertainty at a time when you’re least able to cope.
The untimely death of a company’s leader is devastating enough without the risk of losing everything that colleague worked to achieve. In an article at Small Business Computing, Jim Murphy shared his experience when facing the death of his long-time business partner, Ari Ramezani. The two men were serial technology entrepreneurs and formed several successful companies prior their current venture, PhonePower, a VoIP services provider.
These are some of the steps Murphy took to ensure the company’s continued success and to honor his friend and colleague’s legacy.
A successful business depends on good planning, and that includes planning for the unexpected; incorporate a contingency plan for the death of a partner just as you would devise procedures for managing your business taxes. In Murphy’s case, he had time to install a board of directors that replaced the company’s two-person leadership structure. Examine the roles that you and your management team play and come up with an alternative leadership structure should one become necessary.
If a business partner should suffer from declining health, be upfront with your investors. They’ve put their money and their faith in your company, and it’s respectful to keep them in the loop. While Murphy experienced some trepidation about informing his investors about Ramenzani’s health, he opted for transparency, and the team prepared business projections to allay any investor concerns.
Not only was it the respectful thing to do, it was smart business. Loan documents often contain clauses that give the lender the right to call the loan in the event that one of the company owners leaves or dies.
Insurance exists to protect you or the company from the unexpected, so take the time to reevaluate your insurance policies. If you don’t already have a key person policy, get one before you need it. The policy covers a company in the event that a key person—the primary and often irreplaceable source of business or innovation—should pass away. This type of insurance offers some protection for stakeholders and a financial safety net for your business.
When you’re building a business, no one wants to think about death and its impact on the business. But smart thinking upfront will ultimately protect your investment and the business that you and your team work so hard to build.
Lauren Simonds is the managing editor of Small Business Computing. Follow Lauren on Twitter.