Let’s make a few assumptions and see what happens to a local engineering firm where Julie Smith is the owner in small town America. At XYZ engineering, Julie takes on many of the firm’s vital tasks including payroll for its 12 employees and the important role of bidding of the new jobs. In many ways, Julie IS the business. To successfully navigate the competitive waters in business today, Julie knows a business must keep the competitive edge.
Unfortunately, after just 6 years in business, she has chronic illness or a condition that renders her unable to perform her job duties. Being such a new business, there are a few obligations that must be met. Sure, with the 12 well-trained employees, business may go on for a few weeks or months but eventually, the firm will need to competitively bid for new jobs to keep business coming in the door (assuming other engineers work at the firm). Julie’s family and heirs are now at a crossroad. Do they seek a new employee who can now come into the business and perform those duties? Can the business afford them? Will other vital employees fail to see a future and leave the company as a result? More often than not, a situation like this would result in a fire sale. Families typically pour their entire life savings into the business and never think about how vital a business succession plan is.