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July 23, 2020

Business Succession Planning

Business Succession Planning


Based on my 40+ years of experience with insurance planning, I have found it difficult to get some business owners to slow down long enough to properly plan for the succession of their business.


However, during this COVID-19 pandemic, I have noticed some incredible things happen:


  • Business owners now have a firsthand experience of what it looks like when something unexpected and unplanned for happens and how it can negatively affect their business in a relatively short period of time
  • Without any outside help, many of these businesses would have failed in this short period of time
  • Many of these business owners took immediate action and rushed down to their local Financial Institutions to apply for the Paycheck Protection Program (PPP)
  • So what motivated these business owners to take action and save their businesses from failing?


o   My personal thoughts:

§  The event was real, and it was happening right now! (not some future date)

§  They likely wanted to protect themselves and their family first (since the business is likely their primary source of current income AND the business is likely their retirement plan)

§  They likely cared about their employees and their families and wanted to make sure they were taken care of financially

§  They likely wanted to protect their reputation and legacy within their community and/or industry


I believe that right now is the perfect and most natural time to proactively/intentionally have conversations with our clients about business succession planning (and specifically planning for unexpected events).


Here are (3) simple questions that I would personally be asking business owner clients right now to initially open the succession planning conversation.


1)      “Why was it important for you and your business to receive the forgivable PPP loan?”


2)      “What other unexpected events could negatively affect your business in a short period of time?” (And how do we plan for it?)


3)      “What would happen to the business if one of the owners or key employees unexpectedly died or became too sick or injured to work?” (And how do we plan for it?)


On the next few pages are a guideline to help focus your questions and to help start the conversation.


Please contact:


 Patrick O’Malley                                        or                                Tom Walsh

[email protected]                                                                 [email protected]

 312-925-1142                                                                                630-737-0300


Business Succession Planning





Business Should Continue by Plan, Not Chance


Fewer than 30% of family owned businesses survive to the 2nd generation.

• Only 26% of small business owners have some type of succession plan in place.



What steps have you taken to secure your business succession goes as YOU plan?



The most important thing you can do for your family and business in the succession planning process is to get it started.

All business owners have “plans” in their minds about how the business will continue.

A “plan” is only an idea until it is communicated.

Without proper planning, banks could call in loans, key employees might leave, management may be forced to make poor decisions in response to new owner demands or the business might close all together. You have put a lot of effort in

establishing and running your business. Make sure you are prepared so that your hard work is not diminished.

When planning for the future of the business, there are several important issues related to a business falling under new ownership that you must think about:


• Are the new owners ready and able to manage the company?

• How will your employees react to new management?

• Will key people stay during this transition period?

• Will your customers feel secure and remain with the business?

• Are you ready to exit?

• How will your family deal with the transition?




Each business owner has their own unique situation, but sometimes ideas do not arise until questions are asked and possible situations are mentioned. Consider the following scenarios you may face or are currently facing:


You started your business with hopes of your children taking over and now you have realized they are not capable or have no interest in taking over. Do you have other options? Is there one child interested and another wants nothing to do with it? How do you divide assets equally between your children who are involved and not involved with the business?



You are looking to retire within the next 5-10 years, and you want to continue generating income from the business into your retirement. Like many business owners, the value of your business may be a significant portion of your retirement nest egg. The business may support your income needs currently, but have you considered what your income needs will be when you retire?



Consider inflation, medical costs, post-retirement plans. How will those needs be filled? In addition, how will you ensure the well-being of your spouse, children, grandchildren, business partners, key employees, and charities?



You already have a buy-sell agreement in place and believe there is nothing else to be done. It is true that a buy-sell is important to have but it is a safety net and sometimes is not enough. The plan only works if there is a triggering event such as a disability or death and no one expects that to be the outcome to every business plan. It is designed to protect against the worst-case scenario, but it does not help you in your transition into retirement or keeping your business intact.










Business Succession Questions:


• What about your business keeps you up at night? Are any of those items within your control? Can any of those items be resolved with the assistance of a third party?


• Do you have a retirement plan in place or is the sale of your business your retirement plan?


• Do you have enough money to support the retirement you desire? Are you currently limited on contributions made to qualified plans and IRA’s/Roth IRA’s that are also limiting your ability to prepare for the retirement you desire? Are you aware of other tax efficient vehicles that are available to you as a business owner?


• Does your company have a buy-sell agreement or business succession plan in place? If not, why not? If yes, when was the last time it was updated?


• What do you wish to happen to your business interest in the event of your death, a disability, or your retirement?


• What will happen to business relationships that reside primarily with you?


• Do you have family in the business? What roles will they play? Will they be able to take on ownership control? Do you fear that they may be inexperienced and will interfere with management?


• Do you want to treat your children equally? Have you considered how to do that if some are in the business and some are not? Have you discussed this with your spouse?


• Would you sell the business to key employees? Are there any key employees who can afford to buy it? If not, would you consider a transition plan that assists them?


• What does your business look like in 5, 10, 15 or 20 years? Do you envision still being as active in your business as you are today?



Start the Process

Contact us:

Patrick E O’Malley                                                                              Thomas J. Walsh

[email protected]                                                                      [email protected]

312-925-1142                                                                                        630-737-0300


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