Oct 29, 2021
As a construction business owner, have you ever considered what would happen to the business if you had to take a six months break because of a severe illness or injury?
Would the business survive? How would the bills get paid? And while it might not be nice to think about, if you were to die, are you sure your business partners would give your loved ones a fair deal? For these reasons and many more, all business owners need to have a detailed succession plan. A succession plan is like a will, but for a business. However, there is often a more comprehensive range of scenarios and options to consider.
Just like your will, a good business succession plan can vary from one business to the next. But some key areas should always be considered, which you can find below.
In the event of death or retirement, the ownership and control of the business may need to be transferred to the owner's family or the surviving business partners. How easily this occurs will often depend on how the business operates, such as through a trust, or a company, or without a separate entity at all.
If something happened to one of the business partners, would their spouse or children take over the control of that share of the business? If the answer is no, then a succession agreement can assist the other business partners to continue business operations while allowing for compensation for the former partner's family.
Just like personal insurance, business insurance can provide a range of protection, such as temporarily meeting the standard costs of running the business (business expenses cover) or paying for a short-term replacement manager (e.g., trauma or disability cover). A life insurance policy linked to the succession agreement that provides the deceased partner's family with suitable compensation for the transfer of business ownership to the surviving partners may also be a good idea.
Power of Attorney
Most small businesses struggle to do much without the advice and authority of the figurehead or main key decision-maker. That's why a Power of Attorney is integral to a good succession planning process. It helps the business to physically operate if the owner is incapacitated because of illness or injury.
A range of people may need to set up a succession plan, including a financial adviser, lawyer, and accountant. We can help you find the right team for you.
Even if you already have a plan in place, it is crucial to review agreements and insurance policies to keep them up to date and reflect the business's current value.
Need a succession plan?
The last thing I leave you is "Knowledge is Power." There are simple answers to all complex problems, and they are usually wrong. Invest the time, money, and effort to do it right the first time. With the appropriate tools and processes, you can have the insights you need to manage and grow your construction company effectively and efficiently, even without you running it. You can sit back and relax while you monitor and manage the work-in-process you already laid out. You have what it takes to be successful, and you deserve to be wealthy because contractors add value to other people's lives.
Chat to us to get started. We're here to help you run a successful construction business and protect your assets, now and in the future.
About The Author:
Sharie DeHart, QPA, is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or email@example.com