On February 4, 2012, the CEO of Micron died in a plane crash. Luckily Micron is a public company with a good Board of Directors and a strong bench of possible successors. They announced a temporary successor by the end of the same weekend. But would your private business experience the same fate? Have you built a strong bench of managers, one of whom might be able to step into your shoes? Have you picked a successor or built a business continuity plan? In short, is your business transferable?

A change in leadership normally doesn't happen as abruptly as in the

death or disability of the owner, but it's inevitable that every owner will leave their business at some time. Continuity planning gives you the most flexibility and best chance to do it on your terms. When things happen suddenly and you haven't left any instructions or there is no clear leader, the plan you actually left leaves your business in its most vulnerable position.  Maybe your CPA or your estate lawyer was your most trusted advisor, but are either of them in a position to run your business? The answer is no. They have their own businesses to run, although they will do their best to fill the void you left by recommending someone they trust to run things. Having no written plan leaves them at a serious disadvantage.

When building an exit plan, we look for either a succession or continuity plan as one of the key documents every business owner should have. If your business is a family business that will eventually pass on to the next generation, a succession plan is also very important, but if that next generation is not ready or a family transfer is not a possibility, the continuity plan is the more immediate. It does not need to be an elaborate plan, but should lay out the roles and responsibilities of the key managers and who the CEO should be if you become incapacitated or worse. This plan should be shared with your key advisors and key managers within your organization.

One thing to remember when drafting this document is that it shouldn't be so rigid as to not allow the management team to do their jobs. For example, demanding they follow a carefully crafted vision over the next ten years is probably not appropriate. General guidelines to effect a smooth transition or sale of the business over a one to three year horizon is probably as far into the future as you can hope to control. The main objective is to ensure the business remains on firm footing while an orderly transition is able to be planned and carried out     (read more)