Most business owners don’t have a business succession plan in place to cover them in the event of death or disability, a recent MSI Global Alliance survey has found. Only 24% of owner-managed businesses have a formal business succession plan in place, while 36% don’t have key person insurance to cover an orderly business succession in the event of the death or disability of an owner-manager.
“It is critical in any owner-managed business that a well-considered business succession plan is in place to protect the business and maximise the value for all stakeholders via an orderly sale, especially in the case of the unexpected death or disability of one of the owners,” said MSI spokesperson Alec Blacklaw.
“Thousands of businesses are affected each year from the death or disability of a working equity participant. Many more are affected by disagreements on business direction between joint-owners.”
“Combining a business succession plan with a buy-sell agreement and key person insurance ensures these issues are discussed and agreed before anything untoward occurs. It’s about prevention rather than cure,” Mr Blacklaw advised.
MSI also surveyed aspiring business owners. Almost 90% of aspiring business owners said they planned to create a business succession plan, with most of these intending to review it once every two years at the minimum. 100% thought key person insurance was vital.
The survey of more than 400 Australian and 200 New Zealand owner-managed businesses found that, of those who did not have a business succession plan in place, 40% said they “just hadn’t got around to it”. 19% of those who do have a succession plan in place review it yearly.