"Heads of family businesses should think about this: If you can't afford one day away from the business, how do you think it will survive if you're gone six months or forever?" suggests Frishkoff. "You have to stand tall and face the issue of sudden death or a long disability."
One man, Frishkoff recalls, attacked the problem very pragmatically. He came into the office one day, called in his key people and asked them, "If I had been hit by a truck this morning and died, how would you handle it?" Then he went home and asked his family the same thing. He culled through their ideas, picked out the best, added some of his own and wrote up a simple interim plan.
An interim plan for sudden succession should include the family head's advice on:
Who the interim successor should be. Should an outside CEO be hired? Should a family management team take over? A spouse? A child?
A proposal for the disposition of the business. Should it be sold? Should the family get more involved?
Who should be called on to help set the direction of the company. The plan should provide a list of the business's trusted advisors.
Key success factors that should be watched and monitored. Cash flow? Payroll compared to revenue?
Pre-tax profits? Average time of receivables? Variations in a good customer's order?
Location of important documents and who has access to them. Estate documents, life insurance policies, official company records and so on.
Sources of cash. If a business owner is incapacitated but alive, life insurance does not kick in, and disability insurance pays only minimally. Where can the family go to get money immediately?
A personal statement setting forth the guiding principles on which the family runs the business.
For help getting started in writing your own succession plan, turn to two useful resources: Action Checklist for the Family Business Owner/Manager and Action Checklist for the Spouse of the Owner/Manager. These two checklists are available from the Austin Family Business Program, Oregon State University's College of Business, Corvallis, OR 97331 for $10 each. The checklists don't provide you with answers, but they clue you in on what you must do to prepare for sudden death or disability.
Patricia Schiff Estess is president of Working Families Inc., a New York City consulting firm that publishes the newsletter Working Families, and author of Kids, Money & Values (Betterway Books).