The Best Business Legacy Planning Tips

As some of you may know, I have developed a product called Future File®, which is an easy-to-use kit that helps you to organize your wishes & information and create a roadmap for your loved ones to follow in the case of an emergency, accident, aging or passing.

And, since many of us, especially small business owners and solopreneurs, haven’t done much planning for our own personal and business legacy in the case that something happens to us, we thought that we would reach out to the incredible CarolRoth.com contributor network of business owners, experts, advisors and entrepreneurs to have them share their own best business legacy planning tips. Their answers are presented below in no particular order.

You may notice some similar ideas listed, but I kept them separate, as something in the way one is framed may resonate differently with you.

1. Access Your Business Info

Make sure that your loved ones and colleagues have access to important information about your business, including your business interests, documents and more, in one accessible location. A planning system, like Future File, can help you get started in gathering and organizing your personal and professional information.

Thanks to: Carol Roth of Future File.

2. A Trust is a No-Brainer

If you own a business, having a Revocable Trust is a must. It allows a trusted person to step in and make decisions for you if you become unable to do it yourself due to an accident or incapacity. Otherwise, a Conservator may need to be appointed by the Court which takes time, all the while your business is losing, well, business. If you happen to not survive the accident, your family and trusted successor can step into the business and keep it running without the delay of Probate Court.

Thanks to: John Farrell of The Farrell Law Firm, PC.

3. What Entrepreneurs Fail to Do?

Figure out all those things about your business that only you know or handle. Find out the people in your company that are capable of handling those tasks and have good leadership qualities. Then, develop an internal leadership training program to get your potential successors ready to take up this role in case of any mishap. Take them into confidence and tell them why you’re preparing them and communicate your vision to them. Write down your plan, mentioning your power of attorney.

Thanks to: Hamna Amjad of Whatsabyte.

4. Know Your Way Out

Start with your exit strategy. When you know what you want from your business, you'll have a better idea about your legacy. Do you want to sell it, leave it to your kids, or set it up for someone else to run? How soon do you want that to happen? I wish I had known those answers when I started; my business plan might have looked a little different from the start. Whatever you decide, seek good legal counsel to help you set it up the way you want and create a plan to get there.

Thanks to: Laura Templeton of 30 Second Success.

5. Insurance for Your Business

Having the financial resources to sustain the temporary or permanent loss of a business owner or key employee is critical to the survival of the business.

Business overhead expense or key person insurance can ensure that the business has the cash flow required to maintain operations and even hire a replacement if none are available internally.

These policies can cover either disability or death and provide the necessary financial support to the business during a very difficult period.

Thanks to: Raymer Malone, CFP® of H.I.P. Insurance Agency.

6. SUCCESSion Planning

Have you developed a SUCCESSion Plan? An "In The Event Of..." Plan? SUCCESSion planning makes it easier for people to Step In and Step Up in times of emergency, organizational change, and turnover. Here are a few tips: Job Shadowing, Mentoring, Job Sharing, Employee Role/Project Updates at team meetings and structured succession planning. Know your employees' long term career goals and support through training and mentoring. Help your employees grow with your company.

Thanks to: Charmaine Hammond of Hammond International Inc..

7. Constant Training is a Must

I've found that once you've identified someone who you'd like to take over your business, you should have that person shadow you on a regular basis. Also, if you haven't already created outlines or instructions about how to run the business (important tasks, relationships, routines, etc.) make sure you do so. Then, make sure the person is familiar with them. It will ensure everything runs smoothly.

Thanks to: James Pollard of The Advisor Coach.

8. Been There, Done That

Unfortunately, my son passed away 4 years ago and I wasn't prepared and had little choice but to work! Now, we cross-train everyone on the basics, document processes, make sure more than 1 person has admin access on important accounts and keep everything in the cloud so we can access it from anywhere in case one of us is laid up, had to leave town quickly, etc. In the worst case scenario, make sure to carry life insurance on key staff; replacing them won't be cheap!

Thanks to: Bobbi Baehne of Think Big Go Local, Inc.

9. Key of Business Continuation

Imagine you are stepping in the shoes of the previous business owner: What's the process for onboarding new employees? How does the sales process work that took 20 years to perfect? How do you tackle customer service issues?

All of these questions can be answered if the previous owner took the time to document standard operating procedures (SOP). Every task should be clearly explained. SOPs will help the business transition smoothly and also make the business more valuable when it is sold.

Thanks to: Chris Abrams of Abrams Insurance Solutions.

10. Cross Training is Key!

Whatever size business you may have, you need to have a plan in place for catastrophe. Car accidents, cancer, heart attack... the list goes on. If you are the only person who knows how to do something & you die or get really sick unexpectedly, your business can fail.

I always suggest cross training- having multiple people knowing how to do multiple jobs within the company. A built-in sense of redundancy helps businesses survive the unexpected. Also, powers of attorney make sure money flows!

Thanks to: Ben Baker of Your Brand Marketing.

11. Document, Document, Document

Documentation can be hard to do, but you need to document everything you do in your business so that it can be repeated by someone else. This includes vendors you use and passwords to their websites. What are the day to day workings of your business and how are they done, how mailings are done and how products are made, including all of the little tricks that make it go faster? These have to be written in a way that other people can repeat what you do every day.

Thanks to: Cindy Jones of Colorado Aromatics.

12. Open and Close the Door

When you start your business, you are encouraged to write a business plan. One thing that shocks a new entrepreneur is to think of your exit plan before you even begin. Yet, that's the secret. Plan for succession while planning to open the doors. Decide on a plan of action for prolonged disability, as well as a successful exit. As you open your doors, make sure you do not close the doors without a profit. Whether by planning for an interim CEO or a profitable sale, your business is an investment.

Thanks to: Royce Gomez of Royce Talks.

13. Divide & Conquer

When you’re a sole-proprietor, you quickly realize that every unplanned absence can change your business status if you’re not on top of the little things. My idea of legacy planning is simple: divide and conquer. I make rules and flow charts for every scenario, such as “If A happens, X is the answer.” Although I’m the primary locksmith, I do have an assistant that is ready to take over and lead my subcontractors using these charts at any given moment.

Thanks to: Nadav Hazaz of Milwaukee Lockstar, LLC.

14. Lions, Tigers & Bears! Oh My!

While it is unlikely that you will run into real lions, tigers or bears in legacy planning, it is almost certain that you will run into emergencies and accidents that mean someone else has to step into your job for you. Remove the mystery by making sure your second and third in command know exactly what you do, how you do it, and why you do it that way. Conduct occasional drills, keep good records, and stay organized to make things easier for everyone.

Thanks to: Jeanne Rodriguez of Pennico Press.

15. Start With the End in Mind!

While creating a business/marketing plan, the first step is creating a 12-month working vision. However, that's not enough. To make the best business decisions, one has to create a succession vision, and a vision for an anniversary that lands between 12-months and their succession. Succession Visions are the hardest to create -- just because of the subject matter. However, succession visions are most important to our clients. They want to know what will happen should something happen to you.

Thanks to: Coach Maria Marsala of Elevating Your Business.

16. Extreme Ownership

The term was introduced by Jocko Willink in his bestseller, titled “Extreme Ownership: How U.S. Navy SEALs Lead and Win”. It implies that you must take complete ownership and responsibility for what you are doing and make yourself accountable. You need to instill the same mindset in your team, especially the managers, because it will help you develop a loyal management team. This management team is crucial for the legacy, continuity, or expansion of your business.

Thanks to: Sadi Khan of RunRepeat.

17. Groom Them Early

If you employ many & have a lot of assets, it’s wise to plan for a successor to fill your shoes in the event of disability, burn-out or retirement. This doesn’t mean you have to be far removed, as you could take a more strategic role such as Chairman or Board Member. I recommend either assessing highly-qualified & immediate family members to train or if that’s not an option, then look within the ranks for someone younger with great potential who has already performed at a certain level.

Thanks to: Mac Fadra of MAXiM Facial Aesthetics.

18. Ready for Tomorrow?

An interesting way to continue a business if something happens to the owner is with a key person policy. The business owner would take out a policy for the amount their company is worth now or in the future and then, if something happens to them (pass away) the family or company would have time & money to pay employees and find a replacement or sell the business for its value. These policies can also be done in case of a disability or provide benefits in case of a critical or chronic illness.

Thanks to: Lorena Tomasini of MALM Life & Health Insurance Agency.

19. Build Out Your Management Team

My business partner and I have been exploring this topic for a few months now and we're getting ready to make a big change. In short, we want to build out a solid management team that is competent and ready to step in at the drop of a hat. Right now, my business partner and I make all the big decisions and don't really include any of our employees in the process. We want to change that and it starts with giving managers more responsibility and control.

Thanks to: Matthew Ross of The Slumber Yard.

20. Save Your (Company's) Life!

Worried about an accident, emergency or something else? Securing a life insurance policy can reduce a ton of anxiety. Will the successor be the sole owner? Who knows how long until the successor can operate the company effectively and remain profitable. A life insurance policy can provide instant liquidity so the business is safe and isn't sold hastily. The policy's death benefit also allows the company to pay salaries and bills during this transition.

Thanks to: Michael Quinn of Life Insurance Blog.

21. Schedule Practice Drills

Just like any other disaster planning, you'll want to do some business transition drills. These can include letting the next leader run everything for a period of time or slipping into specific roles in a rotation. Most often, when I see a business transition fail, it's because the next leader isn't fully prepared for all of the roles and responsibilities required of them.

Thanks to: Kristin Ingram, CPA of Accounting In Focus.

22. The Code to Preserve Legacy

To preserve the legacy of the company, you have to create a family code of conduct including: corporate rules, administrative council, mix of independent and shareholder board members, and certification of quality management systems (ex: ISO9001). These elements contribute to the formation of solid administrative and family governance policies that preserve the family legacy through standardization through generations.

Thanks to: Michael Sentz of CaringWire.

23. Get Two to Replace You

Developing a succession plan as a garage can be tricky, because you need someone who's both mechanically savvy & a business manager. Once you have someone identified, I suggest scouting for a 2nd as a contingency plan in the event something happens to the 1st. Create two complimentary leadership roles beneath you if they both work out. From there, it’s simply having everything accessible: leases, account numbers, vendor obligations & schedules, titles & deeds, warranties, passwords, and so on.

Thanks to: Jesse Yuvali of Jesses Garage European Auto Repair.

24. Digital Password Wallet

In order to ensure that our highly valuable domain names and operational capabilities are not imperiled should anything happen to a business principal, we store all business passwords in a digital password management wallet. The password wallet assists in generating and retrieving multi-user passwords, and storing them in an encrypted database. Our business's digital operational legacy is effectively protected because we have had the foresight to manage the risk that no one person has the key.

Thanks to: Brian Ma of Flushing NY Real Estate.

25. Have a Contact List

It's so important to set up a list of clients, customers and/or staff that would need to be contacted if some type of emergency happens to you. And, make sure that several co-workers or family members/friends have easy access to that list, so that those that need to be contacted can hear from someone right away.

Thanks to: Mike Walsh of Mike Walsh Guitar Lessons.

26. Legacy W/ Side of M&M’s

As executive director of a drug prevention nonprofit, with the ultimate responsibility for every facet of operation, it is a priority to document processes - especially since I’m a little past retirement age. Five years ago, I started a company procedure manual. Every detailed task is a chapter updated as processes change. I dubbed my print copy of the manual “M&M’s" for ‘memory minders’. The 24 chapters also serve as job descriptions. A cloud copy is shared with my board of directors.

Thanks to: Norma Norris of C.A.N.D.L.E, Inc.

27. It's Hard To Let Go

If you're ever going to comfortably entrust your business (which you worked on tirelessly for years) to a family member, co-owner or CEO, make sure you have a clearly defined road-map that lets them know your overall plan for the success of your business. Doing so will ensure that the original interests of the business are protected and lets your successor know what's expected. This can be done in an informal manner or be something that's more legally-structured, depending on your business model.

Thanks to: Daniel Joelson of Car Loans of America.

28. Lower the Need for Oversight

Make sure that your business is structured in a way that it doesn't depend on your hands-on involvement. Additionally, share your vision of the company and your intended direction to your executives or family. While this is meant to make succession easier, it's also helpful for your staff to learn to operate more autonomously, while you're still around. It's a growing exercise. Hopefully, if one day you were to step away, your team would be able to continue to run and expand your business.

Thanks to: Alexander Pencer of TFC Title Loans.

29. Embrace Conflict!

Be prepared for conflict and embrace it. Conflict is a normal part of life and it almost always pops up in transitions, and even more so in sudden ones. Engage everyone involved as fully and respectfully as possible. Figure out how to turn any negative (destructive) conflict into positive (creative, collaborative) conflict. Positive conflict can be the key to stabilizing and growing the business after an unexpected transition. Ask for help if you need it.

Thanks to: Jane Beddall of Dovetail Resolutions, LLC.

30. Meticulous Client Notes

I inherited many of my first clients from a colleague who passed away months after I became a licensed attorney in San Diego. The challenges of that transition taught me a lot about inheriting a business. Something that was critical in my success (and my tip for others) were his meticulous client notes, which I analyzed in-depth before meeting each of them. These dossiers allowed me to jump into their lives and solve urgent legal matters in a manner that would have made them proud.

Thanks to: Vik Monder of Monder Law Group, PC.

31. Succession Planning

The single biggest risk to any venture, whether a single owner or multiple owners, is that there is a death. Without proper planning, the business will go to that person's heir. Ensuring that your organizational documents are in order to prepare the business for that event is key. This ensures that something as disruptive as the death of an owner isn't further complicated because of poor planning.

Thanks to: Drew Lyon of Focused Energy.

32. Make the Person Your Assistant

Any entrepreneur would like the closest and most dependable person to take charge of the business in his or her absence. Either your spouse or any of your adult children is supposed to carry your business legacy. You should assign that person as your assistant and share everything about your business. Close interactions and different activities will make the person involved, interested and educated at the same time. Your business legacy will be ready in front of your eyes.

Thanks to: Andrei Vasilescu of DONTPAYFULL.

33. Creating Sustainable Influence

Legacy is not necessarily about the product or services you leave behind, it's about those trustworthy people who will carry your vision after you leave. You must focus on creating a sustainable influence and imprint a mark on those who remain. Make sure to consistently lead by your own example. Communicate your business vision and mission clearly to every employee at every level. Inculcate a sense of ownership among the remaining leaders so that they can carry your message until the end.

Thanks to: Nooria Khan of GigWorker.

34. What is Truer Than Truth?

An ancient proverb asks what is truer than truth and then tells us the answer: "the story". Similarly, author Shannon Alder says "a legacy is etched into the minds of others" by virtue of the stories told about us.

Legacy planning should start with stories that express the truth about your organization's mission, values, and core beliefs. The stories, once collected, then form the basis for the legacy planning that must follow... planning that ensures consistency of those principles.

Thanks to: Marlene Caroselli.

35. Who Will Be Next?

Here are three successful strategies that we use at our firm:

First, assign a trusted member of the leadership team to mentor top candidates and bring in a respected expert to give an assessment of his/her performance potential.

Second, place candidates in charge of a short-term “special project” for which you want to see measurable results.

Finally, transition top candidates to a position with performance goals for which s/he would be accountable within 9 months.

Thanks to: Kelly Isley, Author of Adapt Now.

36. Unusual Business Legacy Tip

The best piece of advice we give to our entrepreneurial, business-owning clients is to stage a mock emergency or accidental death. Seriously, have the business owner simulate a heart attack one evening and then go through process of dealing with that situation. Make it real and involve the business owner’s spouse and key employees.

Thanks to: Mark McKaig of Centurion Wealth Management.

37. Build a Sellable Brand

As entrepreneurs, we focus on our personal power of experience and knowledge. As your business grows, you must find a way to transfer the need for your direct contact to make the business work when you leave. No one will invest in your legacy if you won't be there. Empower others to your stated mission. Give them the authority to act independently (to make both mistakes and successes) and to be the founder instead of the key point of contact.

Thanks to: Mitch Krayton of Krayton Travel.

As always, many thanks to everyone that contributed to this article!

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