Transitioning Through Tragedy
Skrypnyk Group has recently suffered a great loss. Wayne Skrypnyk, the founder of Skrypnyk Group, passed away suddenly on July 21, 2014. Wayne was a true leader, an inspirational presence and a friend. People such as Wayne are not replaced. It is now the responsibility of all who have had the fortune to work with Wayne to continue on the legacy which he started over 25 years ago.
It is times like these that force all of us to reflect on many things. One item that is relevant to all business owners is the fact that many either do not realize, do not acknowledge or do not plan for transition. One day you will dispose of your business. It might be while you are alive, or it could be upon your death. Either way, as an owner it is imperative that you undertake the appropriate planning to ensure that the transition happens on your terms and that the business is in a position to carry on in your absence.
This situation is detailed and discussed in countless case studies. But to us, it is real. There are two remaining Partners at Skrypnyk Group. Sean Ashley and Philip Griffin, along with the rest of the team who will continue on with the same vision and strategy that the firm has always believed in. It is fortunate also that as a firm, we have taken our own advice and are therefore in a position to continue the legacy that is left by Wayne, and built by the team.
How ready is your business for transition? What would happen if you, or a business partner of yours, suffered an unexpected tragedy? Who would your business partners be?
It is with all of this in mind that we would like to share with you Six Critical Principles for Business Continuity and Estate Planning. Please allow these principles to guide your discussion today and share insights on what you may have done or are planning to do in order to ensure that the transition of your business takes place on your terms.
Six Critical Principles for Business Continuity and Estate Planning:
A Clearly Documented Plan
Do you have a plan in place? Who knows about it? What is the timeline for transition?
A Financial Independence Plan
Assuming that you will live into retirement, it is important that you are financially independent from the business. There should be a plan to generate sufficient income that is separate and distinct from the operating business so that you can afford the retirement you have earned and also so your successors are not required to fund your retirement.
A Plan to Keep the Business Financially Healthy
Preserving the working capital of a family owned business is extremely important. How will a buy-out be funded? Can the operations afford the pay-out over the determined time frame? Is any additional funding required?
A Secure Source of Income for a Surviving Spouse
How will a surviving spouse continue to be supported financially? They may work in the business and income will not be an issue. If the business changes hands, will they remain financially secure?
An Arrangement Which Treats All of the Children Fairly
Some family members may be involved in the business while others are not. What is fair for your situation? Things likely will not be equal in value attributed to each child, but they may still be fair given each unique set of circumstances.
Cash to Fund the Will
There will be expenses upon your death. Funeral and burial expenses as well as a terminal tax bill will all need to be paid. Is there sufficient cash available to make these payments? What is the source of the cash – the business? Insurance? Other cash or investments?
We call these principles because we believe that these are non-negotiable. We must address all of them in order to have a complete plan in place. There may not be perfect answers depending on the stage of transition but it is still imperative that these areas are addressed. Financial independence, for instance, will take many years to accomplish. What is important now is that the goal is recognized and a strategy is in process to achieve this goal.
Transition is often difficult for business families. We prefer to spend our energy thinking of how to build the business instead of planning our exit. However, as we have learned in no uncertain terms – you will transition your business one day. You may not be able to choose the timing but you can be choose that the transition takes place on your terms.