“It’s time to get the boat in the water!” is what Joyce has heard Jim say around this time for about 30 years now. Jim & Joyce and their five kids have many wonderful memories boating and fishing on the lake through the years. Now that the kids are all older, and there is a growing number of “grand-babies”, Jim and Joyce have been checking out larger homes on the lake with a vision of many more years of even bigger family gatherings.
Jim loves everything about the times at the lake, and is much looking forward to when he will have freedom from the business to “make it up there more often.” He’s says that “my goal is to pull back in five years so that I can spend more time with Joyce and the family” (Note: but he really hasn’t put a plan in place to ensure that happens). During the summer, Joyce is there most of the time, with the kids and their kids coming and going, but Jim is still greatly needed at the business and only makes it up occasionally.
As a successful business owner, Jim has been able to provide numerous lifestyle privileges for his family that they’ve all come to appreciate and expect. His income from the business has grown through the years to become more than enough to accommodate the way of life the family has become accustomed to. If Jim has any regret, it’s that he’s placed “most of his eggs in one basket.” In other words, most of his net worth is tied up in his business. And, more and more, in his solitary moments, he can feel concerned and anxious about what would happen if he could no longer work in the business. It would be unimaginable at this point for Jim and Joyce (and their kids) not to have these long summers at the lake as well as all the other life luxuries they’ve come to know and love.
Jim lacks freedom because his business cannot run without him. Too many customers still want to deal directly with him, he still needs to make too many of the day-to-day decisions, and if Jim’s not there “the place simply doesn’t run well.” Jim has at least two significant strategic planning issues he’s yet to address (he actually does more planning around getting the lake house open and the boat in the water):
If he’s going to “pull back in five years”, things need to change starting with his role. He needs to assess his current list of responsibilities and then who to delegate to. He may need to further develop current members of the “management team”, or he may need to get new next level managers on the bus. The goal is that the business becomes less dependent on Jim.
And with even more urgency, Jim needs to review his plan for the unexpected…his plan for business continuity…considering questions such as these with the appropriate advisors:
How much $$$ would Joyce need to continue our current lifestyle (with kids and grandkids) if I were to die or become incapacitated unexpectedly?
Where would these $$$ come from? Would the business be sellable? If so, for how much considering I’m no longer working in it? Would it be enough (net of taxes) to produce our same standard of living for Joyce? If not, how do I fill the gap…insurance?
What would Joyce want to do with the business? She doesn’t want to own the business without me, and none of the kids want to work in the business…what would happen and how would it happen?
What would keep employees on board if I’m not there? They will need to think of their futures, and if I’m not there will they see any kind of future for my business? Would the business need additional cash to incent them to stay and to operate effectively until a sale can happen?
These are among the many questions Jim needs to be considering in planning for his financial, values-based, and legacy goals as a business owner. After completing the needed analysis, Jim learned that his business “would need to continue without him” in order for Joyce and his family to be provided for in the ways he desired. But now, he’s got a plan in place to work toward the business growing less dependent on him, while at the same time being assured that in the short-term, if the unexpected happens, Joyce would still realize their life and family goals without the business having to continue.
