Can your small business survive the untimely passing of a founder or high-ranking leader?
As morbid and upsetting as the thought of losing a business partner can be, it's one that every small business owner should seriously consider and plan against. The emotional fallout of losing a colleague—and oftentimes a close friend—is gut-wrenching enough. There is no need to also surrender their hard work.
Just months ago, Jim Murphy faced the death of his long-time business partner Ari Ramezani. Together, the serial tech entrepreneurs first prospered in beepers (a.k.a. pocket pagers, remember those?) and later made a splash in the ISP business as the founders of DSLExtreme. Ultimately, they went on to found Winnetka, Calif.-based Phone Power, one of today's fastest-growing VoIP services providers.
The loss of Ramenzani, a pivotal figure who was beloved by the staff, including many who followed him and Murphy from startup to startup, could have slammed the brakes on a growth streak that helped the company rank on both Inc.'s and Deloitte's lists of the fastest-rising tech companies. Although PhonePower's employees still feel Ramenzani's absence, the company continues to thrive.
Learn how Murphy's secured Ramenzani's legacy with these tips on how to prepare your business for the loss of one of its leaders.
Plan for the Inevitable
As the old saying goes, nothing is certain but death and taxes. Just as you have policies and procedures for handling your business taxes, start making a plan for the passing of a business partner.
Murphy admits that as Ramenzani's health declined, he "had the benefit of being able to do a little bit of planning." That planning involved installing a board of directors, which established a system of checks and balances that replaced the two-person leadership structure that previously governed the company.
Take stock of your leaders' roles and the impact that they have on your operations. Develop alternatives to carry out their responsibilities when they're no longer around.
Prepare to Disclose
Sometimes a death comes suddenly, but if there are signs that a business partner's health is on the decline, "tell the other shareholders," says Murphy. It's not only thoughtful; it's a show of respect for the investment and faith that they put behind your company. No one likes getting blindsided by bad news.
Murphy admits to having been "hesitant [about] when we should tell our banks and lenders" during Ramenzani's health struggle, but he and his team opted to be forthright and "get ahead of the curve." They got to work putting together presentations and business projections and anticipating concerns that may arise.
Not only did the company's lenders prove accommodating, the company avoided some potentially costly consequences. Murphy warns that it's fairly typical for loan documentation to include language stating that "if one of the principles leaves or pass way, they have a right to call the loan."
Evaluate Your Insurance Policies
Murphy advises companies to add key person insurance. This type of insurance product compensates your company should a key person pass away. Generally, this person is the main source of business or innovation and is generally tough to replace. If you envision a monumental struggle to find anyone to take up her mantle, insure her.
Key person insurance provides a measure of protection for stakeholders and a monetary safety net for your business should the unthinkable ever befall it. Inquire about it before you need it.
Reflect with Renewed Purpose
The period following Ramezani's death was "very tough," recalls Murphy. "We have a very close corporate culture," he says. As such, the loss was deeply felt across the organization. Yet, rather than cloud the company's future, it galvanized the workforce and brought them closer together.
While workers paused to privately grieve and pay respects, to the outside world it was business as usual. Despite the difficult circumstances, Murphy channeled Ramezani's drive and passion and kept the business on course. He discovered that a motivational way of lifting spirits, promoting unity and honoring Ramezani's memory was to rally together and strive for success along the path that he helped pave.
Today, WWAD (What would Ari do?) occasionally echoes across the halls and a smattering of his scribbles go un-erased on the whiteboards that dot the office—a testament to his lasting impact.
The actions of Murphy and his team helped Phone Power turn loss into purpose, ultimately cementing Ramezani's legacy.
Pedro Hernandez is a contributing editor at Small Business Computing and InternetNews.com. Follow him on Twitter @ecoINSITE.
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