Ahhhhhh, you did it!  Relaxing on the beach enjoying your first vacation since you opened your veterinary practice a decade ago.  You start thinking about how far you have come building your business from the ground up and finally reaching the point where you can take some time off to relax and recharge.  The water looks so blue and inviting.  You wade into the shallow waters taking in the sights:  the sun, the clouds, the birds, the waves, the shark fin…shark fin!?  You quickly scramble out of the water, thinking, “I should have taken shark week more seriously!”  Naturally you identify the shark, from the safety of the shoreline, as a bull shark, one of the most aggressive sharks in the ocean!  What if that shark had attacked you and left you unable to run the practice?  You go back to your beach chair and piña colada (with an umbrella, of course) and get to thinking.  What would happen to your business if tragedy stuck?  How would your family, employees, and business you worked so hard to build handle your loss?  These types of questions are not fun to think about but need to be a serious consideration for any small business owner.  Emergency succession planning is crucial for preventing terrible consequences in the event of the loss of a sole practice owner.  Every business should have a plan in place to protect the business and the people behind the business.

 

What is Emergency Succession Planning? Why is it Important?

 

Emergency succession planning involves creating a strategy that outlines how to keep a business functioning normally if the sole owner dies or becomes incapacitated.  Emergency succession planning differs from typical succession planning in that the latter entails the transfer of ownership of a business over time in a preplanned fashion.  Emergency succession planning focuses on the immediate loss of an owner without the luxury of a transition period and helps to prevent uncertainty for your business, your team, and your family.

 

If a sole owner dies or becomes incapacitated without a clear plan, the practice can fall into chaos.  In some cases, the comradery of the individuals working in the practice keeps the business afloat, but the unnecessary scrambling, stress, and confusion coupled with loss of leadership still triggers instability in all aspects of the business (Scheidegger, 2016).  Team members may be put into situations where they are forced to take on roles that they are not qualified for, have no training in, or simply do not wish to perform.

 

The last, and arguably most important, consideration for a practice owner is his or her family.  Depending upon the structure of the practice, the family may become responsible for any outstanding debts related to the business.  Another financial consideration is the family’s dependence on the income from the owner of the practice.  An emergency succession plan ensures the future of the business you worked so hard to build, supports your employees who have been instrumental in getting your practice to where it is, and gives your family some peace of mind during the grieving process.

 

Why Owners Avoid Emergency Succession Planning

 

No one enjoys thinking about his or her untimely death or incapacitation.  In fact: “Fewer than 30% of small business owners have a succession plan” (Pasha, 2014).  Veterinary practice owners are no exception in avoiding this issue.  After spending years building and growing the practice, an owner does not want to accept that someday the practice will no longer be under his or her ownership (Robaton, 2016).

 

Plus, there is the issue of time. Most owners of small businesses are extremely busy individuals managing a practice, handling caseloads, and finding time to spend with family.  Given all your responsibilities it becomes hard to find the time to sit down and think about what you want to happen to your business if something were to happen to you (Robaton, 2016).  It is much easier to think, “Well, that will never happen to me!” and move on with the day to day tasks of running a successful veterinary practice.

 

Lastly, emergency succession planning may not have been on your radar until you saw this article.  Busy business owners are usually thinking of the now of the practice and of creating a more successful future, not about their possible demise.

 

Although it’s understandable that it is difficult to focus on this subject, it’s important to become educated on this topic and take the time to create an emergency succession plan for your practice.  Your business and the ones who support you – and those you support – will greatly appreciate it!

 

The Process

Personal Goals

There are a few key ways to ensure protection and support for your family in the event of your untimely death or incapacitation.  A life insurance policy is one critical way to guarantee financial support (Pasha, 2014) while disability insurance is another means to shield your family from financial struggles if you become incapacitated.

Professional Goals

In your absence, do you want a trusted associate to take over ownership of the practice?  Do you want the practice sold and, if so, to whom?  In many cases transferring the business into a living trust is the preferred option.  This option also leaves specific instructions for the trustee(s) to follow the owner’s wishes for the practice (Estate Planning for Small Business Owners, n.d.).  Developing an emergency succession plan based on your vision will help to secure the future of your business.  Below is a list of some general structures for emergency succession planning (Small Business and Planning for Death and Incapacity, n.d.):

  1. Have an established successor
  2. Transfer the business to a trust (as discussed briefly above)
  3. Grant power of attorney to an individual
  4. Create an advisory committee to make decisions
  5. Create employee stock ownership

Business Documents

There are multiple documents that define and characterize a veterinary practice that should be gathered or created for an emergency succession plan.  This documentation includes organizational charts, strategic plans, standard operating procedures, and employee job descriptions.  An organizational chart gives a clear picture of all the different positions at your practice and the reporting structure.  This will demonstrate how changing one person’s role will trickle through the practice.  For example, if your reporting structure from the top down is Owner –> Practice Manager –> Hospital Administrator –> Head Technician and Head Receptionist, and the practice manager will step into your role if you were to die or become incapacitated, then you must consider who will take over the open practice manager position.  Visualizing your practice structure will assist in creating an emergency succession plan.

The new leadership will use the strategic plan for the business to know where the practice is heading and will help them to continue moving towards its goals.  Standard operating procedures will specifically describe how all clinic duties should be executed.  Lastly, employee job descriptions for all staff make roles more clear in the event that positions are shuffled during the implementation of the emergency succession plan.  All of these documents will decrease confusion if the emergency succession plan were ever needed.

Job Description/Tasks

Part of your emergency succession plan is a detailed job description and task list of all of your duties as sole owner (Price, n.d.).  First, this will help you fully understand all of the roles you play in the business so you are better prepared to generate an emergency succession plan.  Second, this provides a useful guide for the individual(s) taking over the business.  The description should clearly define each task, how to complete the task, and what information is needed to ensure completion the task (Price, n.d.).  For example, if paying the electric bill is the sole owner’s responsibility, the description should include how the bill is paid including specific details such as the payment route, how and when the bill is received, and other pertinent information.

Gap Analysis

The gap analysis for an emergency succession plan is done by comparing the job description and task list you made for yourself, the owner, versus what we call the “no owner drill.”  Imagine what tasks would not be done if you did not show up to the practice for a day, a week, a month, and a year.  Any tasks that are not in the owner job description of tasks – the gaps – need to be added to the owner job description and/or task list.  By performing this gap analysis, you will lessen the odds of forgetting an important aspect of the owner’s role in the practice.

Contact List

Another crucial document to construct is a list all companies, vendors, and other individuals who work with the practice.  The contact list should clearly define the organization/person’s name, the service(s) they provide, and their contact information (Price, n.d.).  Having an easily accessible and user friendly list is critical during the rapid transition of the practice; it is always better to give more information than less.

Communication Plan

The permanent absence of the sole owner will be emotionally difficult for the staff and the clients.  It is prudent to have a communication plan to let the staff, clients, and other important individuals know that the practice will be continuing to run despite the loss or incapacitation of the owner (Price, n.d.).  A communication plan should be drafted to relay timely, factual information to staff and clients, including changes that will be taking place to keep the clinic operational.

Your Succession Planning Team

It is now time to assemble your team of professionals who will bring your plan to life.  Accountants and trust and estate lawyers will all be necessary to generate this plan (Robaton 2016).  These professionals will use their knowledge and expertise in taxation and legal matters to form the most efficient and financially sound emergency succession plan for your business.  Sharing your goals with these professionals will allow them to tailor a plan that meets all of your expectations.

It may be worthwhile to have important members of your team, especially the individuals you are hoping to have run your practice, part of these discussions.  Start thinking about which employees you would trust to take on different roles if something were to happen to you.  Do you have a practice manager who could work independently of you to keep the business open and running?  Which members of your practice do you envision taking on leadership roles in your absence?  It is not only important to determine which individuals you would like to take on these roles but to also discuss it with them in advance.  Maybe an employee who you thought would do great in a specific role would not be comfortable performing that task (Price, n.d.).  Preventing surprises is the main reason to have an emergency succession plan, so do not make it a secret.  You don’t want to have someone step into a role in an emergency unaware of even being in the plan!

Training

Once the emergency succession plan is prepared and shared, it is time to train the employees (Price, n.d.).  Are you the only member of the practice who knows the security system code?  Are you the only one who knows how to submit payroll?  If so, then it is time to start training employees on these protocols – and any other relevant ones.  These team members can then get clarification on their potential duties and ask for more training on tasks they do not feel fully prepared to perform.

Finally, practice makes perfect!  This can be done by taking a short- to medium-length leave from the business to see how smoothly the emergency succession plan is implemented.  This is not only a great excuse for a vacation, but an excellent way to perform a gap analysis of the plan.  Your team will also appreciate having a less stressful environment to practice the plan.

It’s an Ongoing Affair

An emergency succession plan is a fluid document that should be reviewed annually (Price, n.d.).  Businesses, personnel, and job descriptions change over time.  The ever-changing business needs have to be reflected in the emergency succession plan because it is not useful to have an outdated plan!

Conclusion

Overall, emergency succession planning may not be fun but is necessary to protect any business in the event of the incapacitation or death of its owner.  Taking the time to make these decisions can alleviate a large amount of stress and uncertainty if the unthinkable were to happen.  Below you will find a simplified checklist of the steps to preparing an emergency succession plan.

Emergency Succession Planning Checklist

Define Personal Goals

Define Business Goals

 

Create/Gather Organizational Chart

Create/Gather Strategic Plan

         Create/Gather Standard Operating Procedures

         Create/Gather Employee Job Descriptions

Create/Gather Owner Job Description and Owner Task List

         Perform Gap Analysis:  Owner Job Description/Owner Task List against “No Owner Drill”

Create Contact List

Create Communication Plan

Assemble the Team

Write the Plan

Share Plan

Train Staff

Practice Plan

Schedule Regular Reviews and Updates of the Plan

 

References

Estate Planning for Small Business Owners: What Documents Do You Need? (n.d.). Retrieved September 30, 2016, from http://jagracelaw.com/estate-planning-for-small-business-owners/

Pasha, N. (2014, February 25). What Happens When a Business Owner Dies? Three Steps to Cheat Death. Retrieved September 30, 2016, from http://www.pashalaw.com/business-owner-dies/

Price, M. L., et al. (n.d.). Emergency Succession Planning Toolkit. Retrieved September 30, 2016, from http://www.leadingtransitions.com/pdfs/ETIToolkit_4.pdf

Robaton, A. (2016, March 15).  Avoiding this can sink a biz…but doesn’t have to.  Retrieved September 30th, 2016, from http://www.cnbc.com/2015/03/02/most-small-business-owners-arent-planning-ahead.html

Scheidegger, J. (2016, January 12). When Tragedy Strikes, Does the Practice Die? Retrieved September 30, 2016, from http://veterinarybusiness.dvm360.com/when-tragedy-strikes-does-practice-die

Small Business and Planning for Death and Incapacity. (n.d.). Retrieved September 30, 2016, from http://business-law.lawyers.com/small-business-law/small-business-and-planning-for-death-and-incapacity.html