Why a Business Continuity Plan Needs to be Part of Your Estate Plan

If you're hoping your business will outlive your tenure there — and will provide for your family when you're gone — the time to start planning is now. The first step is to incorporate your business into your estate planning. The next step is to make sure that your estate plan includes a business continuity plan that accounts for the possibility of you becoming incapacitated — or dying.

Here's how to make a plan to keep your business afloat when you're no longer steering the ship.

What is a business continuity plan?

A business continuity plan is a document that explains the procedures to follow so a business can withstand a variety of unexpected challenges — from a natural disaster or cyber attack to the serious illness or death of an owner.

One important part of your business continuity plan is the part that focuses on who will take over your role in the business if you die or become incapable of running your business due to illness or injury. What potential issues could your business partners and your heirs could face when you're not there? And how should those issues be handled?

If you run your business with other co-owners, you should discuss this plan with your partners in advance so you all are in agreement on the plan — and so there's no surprises.

A solid business continuity plan not only prevents conflict or problems if you are suddenly unable to run the business, but it is also an asset to whoever steps in to fill your shoes. A strong business continuity plan can help keep your business stay afloat if and when the unthinkable happens.

Succession planning

Perhaps the most important element of your business continuity plan is a succession plan.1 Whether you are a solo entrepreneur who hopes to create a multigenerational family business or an owner with several partners, it's important to have a contingency plan for who would run the business if you cannot.

Not only is it important to discuss the plan with other owners of the business (if any), it's also crucial to talk about a succession plan with designated heirs. Who has the skills — and the desire — to run the business when you're gone? Would your partners want to simply buy out your portion of the business and continue running it on their own? Is there an employee who make an excellent owner and would like to buy out your heirs?

A business can be harmed irreparably by miscommunication and fights between managers, family members, and employees if the succession plan isn't clearly delineated and discussed ahead of time.

In addition, family members and employees may need mentoring or training to develop the skills and leadership required to continue growing your business, so it's wise to start succession planning early.