Today's Viewpoint: A MarshBerry Publication

Internal Perpetuation Planning: Ensuring the Longevity of Your Business Legacy

Are you the perpetuating factor that inhibits perpetuation? Or, simply put, are you getting in the way of your own internal perpetuation plan?

Perpetuation, in the context of business planning, is often misunderstood and underestimated. It’s a term that carries both positive and negative connotations, rooted in the Latin word “perpetuare,” meaning unending. Perpetuating factors, in essence, refer to elements that sustain or prolong a situation or issue. In the context of business perpetuation planning, these factors can either support the growth and continuation of your firm or hinder its progress.

One common challenge in perpetuation planning is the tendency to overlook planning, expecting the future will seamlessly align with your wishes. Or to selectively interpret outcomes, only preparing for certain scenarios. This can lead to a distorted view of the current situation and hinder effective planning. This can be especially true for internal perpetuation plans. Many internal perpetuation plans revolve around two important aspects: business relationships and personal relationships. When a business perpetuation plan involves family members or individuals who have personal relationships outside of the business – perpetuation planning may need to go beyond just business matters and include other considerations.

What does an internal perpetuation plan include?

Rather than focusing solely on “perpetuation,” a more comprehensive approach involves considering how and for whom you want to preserve and grow your business’s value. This perspective acknowledges that your objectives may change as your agency grows, your family situation evolves, and as you age. Here are things you may want to consider:

  • Terms vs. price. When creating an internal perpetuation plan, the terms are often more critical than the price itself. Key considerations include establishing a fair valuation, determining payment amounts and time periods, and defining limitations and obligations imposed on new owners, who may be family members but will also become debtors.
  • Alignment with your Will. Your perpetuation plan should align seamlessly with your Will, ensuring that your wishes are clearly stated and legally enforceable.
  • Succession planning. A well-rounded perpetuation plan should also encompass a succession plan. A succession plan will ensure that critical roles within your organization are covered as other people assume greater leadership or ownership roles.

Succession plans need to be clearly and consistently communicated

Within a perpetuation plan, succession planning must be a key component. Organizational succession prepares key leaders for future roles. Preparing the new leader(s) of your firm must be thought out, communicated and clear to ensure a seamless transition of power. When identifying a successor consider these questions:

  • Are there family members already involved in the business? In what capacity and how may this change over time?
  • Are there senior leaders in the organization that are candidates for succeeding into ownership? What is your level of personal relationship with these people?
  • Does each key player really want to be in the business? Are they capable of running it?
  • What level of additional training, mentorship or education is required before the successor is ready?
  • How are you preparing them? What additional steps can you begin to take now to ensure their success?
  • Most importantly, have they been informed of the succession plan and included in the perpetuation planning process?

Create a plan for long term success and stick to it

Perpetuation planning should be viewed as a continuous process, and accountability is a crucial aspect for success. It starts with determining what you want your legacy to be. What vision do you have for the firm once you leave? This vision must be communicated and created with the upcoming leadership involved. Creating a sustainable future for your business and family will only be accomplished through collaboration. Don’t be afraid to ask tough questions and gain feedback from all parties involved. Don’t draw conclusions in your mind without engaging others and getting them on board with the plan. Consider the relationship you have with each stakeholder and how that may be affected, personally and professionally, and how that may play a role in the perpetuation planning and succession implementation. The relationships you currently have with these people will not be passed off with the business, they will remain for years after – so consider all angles.

Take the time to select the right advisor

Failing to develop a perpetuation plan can lead to undesirable outcomes for you, your family, and key employees. Without a plan, the continuity and legacy of your business may be jeopardized. That’s why choosing the right professional advisor to help develop that plan is paramount. That advisor should possess expertise in perpetuation planning and understand the nuances of your specific situation along with comprehensive knowledge of the insurance brokerage space. Their guidance can be invaluable in navigating the complexities of the planning process.

In the world of business, perpetuation planning is an intricate and multifaceted process that requires careful consideration of numerous factors. It is not merely about sustaining a business but ensuring its continued growth and relevance. By defining your goals, involving your family, and enlisting the guidance of professional advisors, you can develop a perpetuation plan that secures your legacy and paves the way for a prosperous future. Remember, your actions today will shape the destiny of your business tomorrow.

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Contact Tim Makowski
If you have questions about Today's ViewPoint, or would like to learn more about how MarshBerry can help your firm determine its path forward, please email or call Tim Makowski, Senior Vice President - Business Development, at 440.462.2246.

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