Are You Prepared For Business Succession?

The staff at Portsmouth, N.H.-based DC Audio Video Systems is in shock.

They lost a friend, mentor, business partner, husband and leader on May 1 when David A. Copestakes, founder and president, was killed in a tragic motorcycle accident. He was not far from the office en route to meeting with a client when, apparently, a dump truck pulled out in front of his motorcycle.

Last summer, I was fortunate to get to visit David, 50, along with his wife and business partner, Sharon, and partner, Nick Mark, at DC Audio Video (creators of the Batcave Home Theater Room). David called the triumvirate "a three-way partnership," aimed at taking the company "to the next level." The company was already successful, appearing many times on the CE Pro 100 list with revenues around $2.5 million.

I don't know if it's ironic or just a sign of David's business acumen, but he attended the CE Pro Business Valuation Summit held last November at EHX Fall in Long Beach, Calif. There, we had a somewhat lengthy private discussion about his plans for the company. I don't know if his plans were in place when he died, but the legacy of DC Audio Video Systems was on his mind.

I have written a lot about exit strategies for companies, but haven't devoted much ink to business succession planning. For David and most other CE pros, developing a business succession plan is one of the last things on the mind. But that plan (or lack thereof) is potentially only one untimely accident away from being implemented.

Some of the key questions to ask yourself are:

Do you have the cash flow to handle the estate taxes, which can claim between 18 percent and 55 percent of your assets? Many businesses have to go heavily into debt or liquidate assets to pay off the estate taxes. One way to prepare for this is with adequate life insurance that will adequately fund the business.

Do your clients use the company's custom installation services primarily based on the strength of your personality? Following the death of an owner or partner, clients routinely take their business elsewhere under the belief that the company will struggle. To prepare for this, work hard to extend clients' trust, respect and goodwill beyond just the owner by shifting client-care responsibilities to others. Sending notes, stopping by or even calling (not to sell something) can help.

Will your technicians, programmers, sales and administrative staff have loyalty to a new owner or a remaining partner? This is just a matter of building up the trust and confidence of the "owners to be" among employees.

For me, DC Audio Video will not be the only legacy of David Copestakes. When I was up in Portsmouth last year for lunch, we went to a local brewery that the group especially enjoyed. There, the lunchtime conversation drifted to hiking and other outdoor passions. Next time I am in town, I plan to stop by that local brewery and toast a bottle of beer to David and his legacy.

What are your business succession plans? I want to hear.