Scenario: When Barry got up in the morning, he realized that he wasn’t as young as he used to be. He still enjoyed the building business, but its long hours and the total concentration it requires had certainly taken its toll. It would be nice, he thought, to lay out on a beach somewhere, and let someone else worry about meeting the budget and dealing with customers’ expectations.
Then Barry had a chilling thought: What would happen to the company if he were to drop dead the next day? He hadn’t planned for any transition, and was unsure if the company would survive and continue to provide financial support to his family. His wife wasn’t involved in the business, and he felt she would simply be overwhelmed with the demands of running a company. His children had careers of their own and weren’t interested in being builders. Would his employees carry on, or would they simply find work with other builders?
Regardless of the time he had left before retirement, Barry realized that he would have to make some decisions about the future.
Solution: It’s never too early to begin planning for transition and retirement. How well you plan for that transition will determine the company’s future worth when you die or retire.
The first thing to plan for is an unexpected transition due to death or incapacity. Barry may want to purchase “key man” insurance that would pay a designated benefit in the event he can no longer function as president. He can do this in the event of death or disability. It would provide sufficient capital to complete any projects in the works, and keep the company afloat until a transition could be made.
Even if there is no one to take over the company, Barry should also streamline his procedures so that someone else would be able to step in and take over his projects without a loss of information.
