06 Dec Small Biz Owners: attorney gives top 3 planning tips to manage your business
I was reading a Biz Journals article the other day about the percentage of microbusinesses (10 employees or fewer) that have closed up in the last couple of years. Part of it is because of the economy, but there are other reasons that small businesses don’t succeed – lack of organization, lack of business knowledge, and lack of planning. I’ve asked my friend, attorney Lincoln Strawhun, to give some advice on long-range planning for small businesses:
Do You Own A Small Business? What Happens To It If Something Happens To You?
by Lincoln Strawhun, J.D.
If you are like most small business owners, you run every key aspect of the business. The business cannot run without you. At least, it cannot run as well without you. That’s why you cannot go on vacation. Or if you do, it is for a long weekend (not for two weeks). And you have trouble relaxing while on vacation because you are so worried about how things are going back at the shop. That’s a concern. But there are bigger concerns.
What if something happens to you that is more serious than not being able to go on vacation? What if you get sick? What if you get in an accident? What if…? Below are three planning considerations for small business owners.
1. Begin with the end in mind. What is your exit strategy? Whether it’s day one or you’ve had your business for 10 years, you should know the answer to this question. I know one small business owner who says, “As soon as I have enough money in my IRA I’m done!” Another says, “My business will be perpetual. It will keep paying me long after I retire.” Yet another says, “I’m going to build up enough company assets so that I can sell it .” All of these exit strategies are fine. Knowing which strategy is the one for you will help you make proper decisions along the way.
2. Train a Number Two. Grooming a person who can run the key functions of the business makes for a more efficient, stable and successful operation. Even if you are a solopreneur, you can write a policy manual (15 minutes per week) that could help train a new employee when you grow or guide a seasoned professional who is stepping into your role under emergency circumstances.
3. Create a Living Trust or Will. A Last Will and Testament can outline what you want to happen to your business if you are no longer with us. The limitation is that a Will only becomes a effective when you die. And at that point, you probably don’t care what happens to your business. A better option is a Living Trust. A Trust becomes effective the day you sign it and is fluid throughout your life. If you become incapacitated—through illness, injury or otherwise—a successor trustee can carry out the terms of the Trust (including the operation of your business) until you recuperate.
These considerations will help protect what you work so hard for: a thriving business. And it will help create a business that thrives even when you are sick, recuperating from an accident (or when you’re on vacation).
Lincoln is an attorney with the Law Offices of Carol Bertsch and is a member of the National Academy of Elder Law Attorneys.