Fire Drill - Why a Stress Test of Your Business Continuity and Succession Plan is Critical to the Survival of Your Family Enterprise

by John McAlister and Brad Standridge

Think for a moment about the phrase… in an Actual Emergency. Every time you step onto an aircraft, go to a movie, or other venue where you must know how to exit in an emergency you are told what you must do in preparation so that you can focus for just such an event, should it occur. In the event of your death or disablement, your business and family will not get the benefit of a second chance. Are you sure you won’t be compounding an already tragic scenario, leaving your heirs saying “I wish ‘John’ would have made his wishes clearer or that he would have simply thought through events and consequences, it would have made our lives so much easier right now”? How do you know? When was the last time you ran a Fire Drill on your transition strategy in an emergency?

The entire world went through one of the most difficult financial stress tests during the financial meltdown of 2008/09. As you can most certainly attest, only the strongest and fastest adapting businesses were able to survive financially. This one financial event forced every business owner to rethink and re-tool almost every aspect of their business – financial and otherwise. It gave a number of us a few more grey hairs and many sleepless nights, and hopefully we have all learned some valuable lessons in the process. As you think back on 2008/09 and how you, your family, and your business faced the financial meltdown, what changes did you put in place to be better prepared for the next time? Having been battle tested, you are most certainly better equipped to face the new threats of 2020 and its many challenges and opportunities that are yet to come.  As far as your Business Continuation Strategy (sometimes expressed only in your Wills and Trusts) is concerned, do you feel that your family and those associates who depend upon your sound judgement would give you an overall passing grade? If you do not Stress Test the documents and the overall plan prior to an actual emergency, those who are left to carry on will be forced to deal with the consequences – good or bad. 

Business owners inundated attorneys’ offices in the fourth quarter of 2012, ahead of the perceived reduction of the lifetime estate and gift tax exemption. Those who waited until the end of the year did not have time to take full advantage of the opportunity and left enormous value on the table. We anticipate a similar situation in the latter half of 2020 ahead of a watershed election that could bring a Tsunami of change in response to budgetary shortfalls that have been exasperated by the pandemic. The 2017 Tax Cuts and Jobs Act (TCJA) created another huge opportunity to leverage wealth transfer and that Act could be in jeopardy in 2021. Getting a head start may prove to be the largest single long-term value creator to your business and family over the next business cycle. 

If your business today is demanding more time than you have, you may want to consider outsourcing a Fire Drill of this importance to an experienced professional who can successfully coordinate all the necessary components, key advisors and family members to identify all issues and opportunities.

As a business owner, you put nearly everything at risk financially and emotionally each day that you are open for business. It is difficult enough for your spouse, your children, and your friends to say goodbye after your death; however, think about how much more of a burden you will place upon them when they are forced to clean up a financial mess created from simply not having the correct documents or ones that are inadequate. Losing a loved one to death is hard enough, why make it harder on the people you love, and those who love you by not planning adequately in a business transition. 

The Beringer Group, based in Radnor, PA, with satellite operations in Mt. Laurel, NJ, Tampa, FL,  and Atlanta, GA,  has been working exclusively with some of America’s finest family-owned and operated enterprises since 1979.  Focusing primarily on business succession and transition issues, which include many types of conflict resolution, The Beringer Group has served over 2,200 families, over multiple generations. The Beringer Group itself has also successfully transitioned to its second generation.  

About the Authors

John R. McAlister

After working with CIGNA Financial Advisors, John co-founded an advisory firm in 2000, focussing on complex family transitions. He sold his practice in 2012 to become part of TBG. He is a graduate of the University of Georgia.

Brad Standridge

Brad is a former Investment Advisor Representative for an independent Broker/Dealer prior to joining the Beringer Group in 2007. His focus is on business development opportunities for middle-market business owners.