This topic may be uncomfortable for some, but it is a very necessary discussion to have. What happens to your organization if you die tomorrow? Would it be a loss so catastrophic that the company fails? Or have you created a sustainable business that can survive and thrive without you? Many entrepreneurs neglect this subject – after all we think we have a lot of good years left. And besides, it is a real downer to think about dying.
One of my most important objectives is to make sure that each of the various companies with which I am involved is sustainable for the long haul. I care deeply for the hundreds of families that depend upon us for their livelihood. Even if your company only has six employees, they likely have families too that are counting on you. So, we need to take the steps necessary to ensure sustainability. Let us examine the different components of a sustainability plan.
Growing future leaders is critical to sustainability. And avoiding a power struggle is equally critical. Who is your heir apparent? I do not believe that it is healthy for any leadership team to wonder at any point in time who will step in to lead in the event of the demise of the leader at any level. If your potential successor is not yet apparent, perhaps someone you know very well, and trust could be designated to step in on an interim basis. There is no doubt that identifying such a person may be tough, but this is tough stuff, and your team deserves to know who is going to succeed you. Focusing on sustainability always forces us to make leadership development a top priority. A quarterly review of a hypothetical organizational chart is a good approach to spotting the gaps and filling them promptly.
If we are the majority owner of our company, what will happen to the ownership going forward? Will it be left to one or more family members? If so, what will they plan to do with the business? Many heirs are not prepared to own a company and all that is entailed. It is crucial to have a conversation with family members and offer them a clear understanding about what will happen to the ownership if we die suddenly. What if there are multiple owners? Buy/sell agreements are an excellent tool for situations like this and can be funded by insurance. Such agreements should be precise on exactly how a deceased owner’s interest is to be valued.
Let us talk money. The death of an entrepreneur can have far-reaching consequences financially. There may be covenants that accelerate loans. Perhaps the entrepreneur has been self-funding a certain project or expansion of the business. It is also possible that without the entrepreneur’s balance sheet, credit facilities may dry up creating varying degrees of hardship. Again, insurance can help but may not be the long-term solution. It may be prudent to identify a potential financial partner that could be called upon to help. Of course, there is a price to pay for this kind of support – an ownership stake or a percentage of the profits – but such an arrangement may be necessary for sustainability. Now is the time to figure this out while we are still alive to do so.
Finally, we need to contemplate how our vision and the culture we have created can be preserved. This is the trickiest and most intangible task that we will face in planning for sustainability. Have we sufficiently communicated our vision; reinforced it repeatedly, and is it shared by all? Many leaders are so consumed by tactical decisions that the vision for their organization is muddled. And it goes without saying that our culture is built around our vision. Maintaining a vibrant culture can only be accomplished if it is front and center every day. Do we have core values? Are we truly living them?
Creating a sustainable organization that will survive us requires intense planning and tough decision making. Doing so is the greatest gift we can give to our team members.
This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.