Good, Better, or Best? Why Our Customers Need Business Succession Planning

Federated Insurance Safely Speaking

by Jon Medo





Business Succession Planning Is Essential to Success

Since a business is typically an owner’s most valuable asset, the quality of a business succession plan often drives the future, financial security, the prosperity of the business, the happiness of the owners loved ones, and the fate of loyal employees. It also determines the reputation and legacy an owner leaves behind.

No Plan: A Disaster Waiting to Happen

Unfortunately, some business owners do not have a plan for transferring possession and management of their business. While they might spend 60 hours a week building up a business, they will not dedicate six hours a year to developing a succession plan — a vital piece of documentation in the event of an unexpected death, disability, or retirement. A no-plan approach maximizes the possibility for confusion, misunderstanding, disruption, and disagreement. Such a lack of strategy can lead to conflict, adverse publicity, and litigation. Not having a clear succession plan virtually guarantees lost value and additional, avoidable expenses.

Why No Plan?

Owners often fail to plan because they are too busy, or simply do not know how to create a succession plan. Sometimes they are naturally reluctant to face change, uncertainty, or tough decisions. There are many reasons for procrastination, but the reality is that transferring a business without a succession plan is like building a high-rise office complex without blueprints, contractors, or permits — it is downright dangerous.

What Are the Choices?

We’ve all heard the saying, “Good, better, best. Never let it rest until your good is better and your better is best.” “Good,” “better,” and “best” can be used to describe the quality of a business succession plan, although no plan at all would add “poor” and “worst” to the list. Federated, with its best-practices business plan and service standards, directs business owners towards the best succession plan.

What Is the Best Business Succession Planning?

The best business succession planning is a process in which the business owner declares his or her wishes for the business. Next come the plan (instructions), the people (owners, employees, and advisors), the legal work (properly crafted agreements), the cost-containment strategies (tax planning), and the funding (insurance) to ensure those wishes are fulfilled.

What Are the Desired Results?

A quality business succession plan transfers the business to the right buyers at the right time. The goal is to ensure that, after the transfer, the old owner is satisfied with the transfer and receives full value, the business thrives, and all persons impacted by the transfer have a greater opportunity for fulfillment. The succession plan also makes sure all secondary stakeholders — including customers, creditors, and franchisees — are taken care of. Few things are more satisfying for a Federated employee than making a meaningful impact on a customer’s business succession planning.

What Federated Brings to the Table

We have found that what we deliver helps makes a superior plan. Federated’s support system helps ensure customers are getting the right services and best value.

  • Marketing representatives — understand, educate, motivate, and facilitate
  • Major Client Service Standards and Financial Protection ReviewSM — regularly raises the subject, dig into real facts, and clarify issues and management options
  • Audits — provide business-value estimates and review of documentation
  • The attorney network — make available specialized local attorneys
  • Life insurance products — helps ensure cash is available when needed
  • Home office support — helps avoid costly mistakes and coordinate implementation
  • Management focus — helps ensure high-quality support and financial stability

A Foundation for the Future

A mediocre business succession plan is no laughing matter. Given that ownership of every business could eventually transfer, it just makes sense to transfer it under a well-constructed succession plan. For more than 40 years, Federated has promoted and supported best-practices business succession planning. We have done so in a practical, knowledgeable, and interdependent manner. Because of our commitment to business succession planning, Federated and our customers have prospered, and will continue to succeed for generations to come.

This article is for general information and recommendations for risk prevention only and should not be considered legal or other expert advice.  The recommendations herein may help reduce but are not guaranteed to eliminate any or all risk of loss.  Some of the services referenced herein are provided by third parties wholly independent of Federated with the understanding that neither Federated nor its employees provide legal or other expert advice.  Qualified counsel should be sought with questions specific to your circumstances.  © 2018 Federated Mutual Insurance Company.