What Happens to Your Business when You Die?

The only thing certain in life is that we all die. If you have not made plans for your business then it will die at the same time.

  • Are you the only person with access to your clients?
  • Are you the only one who really understands how the business works?
  • Are you the only one with access to your banking and accounting details?

No business continuation planning guarantees that your business will fail. Most work-from-home businesses depend on one person; if that man or woman dies then the business comes to a crashing stop.

Is this Depressing?

One of the changes that occurs with age is that you accept the inevitability of death. You cannot avoid your life ending but you can mitigate its effects.

If your business stops, then your family’s income stops, dead.

Selling the Business

A business that is effectively one person is not a business after that person’s death. It is worthless; it will generate no income, so any business sale will only be of the business assets. The sale price will in no way reflect its earnings while you were alive.

Many business owners have this fond idea of selling their business either before or after their death. They are living in Cloud Cuckoo Land if there are no continuation plans for the business in place.

Planning is the Key

Most business continuation consultants are only interested in selling you insurance. This is the real world: If you are more than 50 years old then your business cannot afford to buy insurance to pay someone’s salary for a year to replace you.

Most people just run their home business from day to day, taking decisions as needed, taking orders and ordering stock. They have a contact list, a website and an accountant and that is pretty much it.

You need to bring people into the business and to immerse them in it so that they understand every aspect of the way the business runs.

Analyse Your Business

Most of us do what needs doing and never actually list the hundred and one business-related tasks we do each day. The first step in continuation planning is to know what you do. The second step is to train someone or a group of people to be able to do those tasks as well as you do.

You cannot expect even a family member to step in and to put in the same time that you put in, but you can bring in family members as employees and gradually teach them about the different aspects of the business so that they come to understand it over time.

Some people argue against employing relatives and there are some risks. However, if your business is sound and if you can bring people in without them having to give up other paid employment then it is a win-win situation.

There is more trust between two people who have known each other for decades or grown up together.

Categorising Business Tasks

In most businesses tasks fall into one of three categories:

  • Communication
  • Processes
  • Payments

Often it is the payments category that is overlooked when business owners are planning how their business will continue without them. Processes are fairly easy to outsource or to teach to others, communication systems can be changed fairly simply with a little forethought but payment systems are the biggest obstacle to any business continuing in the event of the death of the prime mover and shaker.

Any forward-thinking business owner needs to address all three task categories to have confidence in the future.

Case Study 1

Alan had a writing business that he ran from home. In the beginning he did all the writing himself, but soon realised that his income was going to be limited by the number of hours he could write in a day.

Alan joined an outsourcing site and hired writers to handle the article writing work. He paid them for their work before he was paid by his client, carrying the risk of non-payment himself. Alan made less profit on each article, but more overall because he could take on many more article orders.

After a few years the business was generating a good income, but Alan was 64 years old and realised that the business would stop producing income for his family if he died. There would be no money to pay the bills, including the mortgage, the house would be re-possessed and the family made homeless.

Alan’s Processes

Finding writers and new clients were the most important processes in Alan’s business. He had been finding writers and editors using oDesk. Alan had been finding new clients largely through his personal contacts and forum activity on a range of sites. Finding writers and editors was something he could assign to a trusted employee.

Finding new clients was a bigger problem. Alan solved it by asking other family members to become involved in the search for new business. This would also prepare the way for him to take a step back from the business in a few years’ time.

Alan’s daughter had young children and wanted to give up her full-time job. He asked her to edit the articles that his writers were sending as a first step. This gave her a taste of the business and she was able to do the editing between school runs.

Alan also brought in one of his sons as a second-line editor to do the final proof-reading that he had been doing himself.

Alan’s Communications

These were happening using Alan’s personal email and G+ accounts. Alan set up a few email accounts using the company’s website, so his email was something like Alan@mybusiness.com. He set up new email addresses and a new company G+ account through Gmail for companies. The cost of this including Google Vault was $10 a month, which was tax deductible as a business expense as well.

Alan’s Payments

Alan was paying writers using his personal PayPal and bank accounts. His payments were coming in through the same accounts. Alan knew that when he died all his accounts would be frozen, so this had to change. He has spoken to his accountant about and asked him to find out about the best options that are available, so he has started this process moving.

Case Study 2

Patrick was a plumber. He had grown his business for 30 years and was in his 50s when he began to think about retirement.

Patrick ran his business from home in a small town in England. He had a house with a large yard where he kept his vans and where business was run from. For the last few years Patrick had largely been a manager, sending out his plumbers to handle the jobs and visiting them while they were working to make sure everything was going well and that customers were happy.

Patrick had built up the business and his reputation in the town over decades and knew that he could sell the business when he retired. He also knew that anyone who bought the business would give him less for it than the business would generate if he could keep it in the family.

Patrick’s Processes

Patrick’s business depended on his reputation and on repeat custom. Managing his reputation depended on his quality control processes. Patrick had brought his son into the business as an apprentice and had trained him himself. He knew his son was totally trustworthy and would never take shortcuts in his work.

Gradually Patrick assigned more and more of the quality control to his son but he realised that he needed a manager as well, someone who would run the business according to Patrick’s instructions because he was being paid a salary to do just that.

He hired a manager who he gradually assigned more of the business’s processes to. The manager gradually took on tasks such as finding new contract customers, dealing with the accountants and vehicle maintenance and replacement. The manager and Patrick’s son took over recruitment of new employees between them with Patrick’s oversight.

The business still ran from a converted stables building in Patrick’s back yard so he knew everything that was happening and was able to keep overall control of the direction it was moving in.

Patrick’s Communications

Most of Patrick’s customers contacted him by phone when they needed work. The business had a website that had Patrick’s contact details and that was it.

Patrick gave his phone to his son so he would no longer be woken up at 3 o’clock in the morning with tales of overflowing toilets and burst pipes. The business office was now manned by Patrick’s daughter, who was paid a wage for managing the office.

Patrick paid a local company to develop his website because he realised that new customers wanted to be able to check out his business before asking for a quotation. The website developer also trained Patrick’s daughter so that she could update the site and showed her how to set up business social media accounts.

Patrick’s Payments

Patrick’s business was set up as a limited company in the early days, so he knew that the finances would carry on in the event of his death. The company had its own bank account that all payments went through.

How Will Your Business Survive?

You can start the business survival process by analysing your business processes, communications and payment systems. You know your business better than anyone else and you know which tasks can be done by others. If you have no family members who want to take on the jobs then you will need to hire employees and to train them long before you plan to step back from the business.

The transition from a one-man-band to a company with its own bank accounts, managers and other employees takes many years. You need to start now.

Talk to your accountant and explain that you need to set up systems to ensure that the business continues to generate an income for your family even after you are dead and buried. The accountant should be able to give you advice regarding company formation and bank accounts.


What processes can you assign to someone else?

How can you modify your communication systems so that they are less dependent on you?

Have you set up a company  bank account?