Buy onlineCarol Mazaka, Head of Customer Service at 1Life Insurance
In my years working in the insurance industry, I have noted how hard it is for business owners to pass their businesses to the next generations successfully. While some business owners have gotten this right, a study by the Conway Center for Family Business has revealed that only about 30% of family-owned businesses successfully transition to the second generation, and only 12% remain viable into the third generation. If you consider the hard work that goes into establishing a business, as well as the economic challenges that business owners navigate to build a sustainable business, it is disheartening to note that for so many hardworking business owners, these efforts do not translate into generational wealth.
While some of the contributing factors may be beyond a business founder’s control, often, the lack of success in this area has been chiefly the result of business owners neglecting the essential steps of preparing the next generation to manage the business and its finances effectively. Furthermore, many have failed to align the business portfolio with the next generation’s interests and skills and, more importantly, create an estate plan centred around successful succession and generational wealth prospects.
Our annual Generational Wealth survey revealed that about 31% of respondents have started a side hustle/business or a second job to make ends meet – further proving the need for understanding the importance of succession planning to avoid working in vain. This way, business owners will ensure their businesses make it to the second generation and ultimately become a wealth-building tool.
The question is, where do we begin?
Having identified the gaps in succession planning, we launched an offering called the 1Life Insurance Wills and Estate Plan in May 2023. This is an innovative life insurance product with cover specifically designed to address challenges traditionally associated with estate planning, executorship, and Wills with a critical focus on addressing an estate shortfall to provide liquidity in the estate.
After working hard to start and establish a business, business owners should be able to leave their beneficiaries a stable financial future with a plan that covers cash shortfalls in their estate and provides for a valid, signed, and retrievable will. This way, their well-informed decisions of who should take over the business will be honoured, as listed on the will. Additionally, business owners can make sure that their businesses are passed on to their family members, who have the capabilities to take care of their business and pass it on to the next generation once they are gone.
When it comes to estate planning, there is no better time than now to ensure that things are in order, and a great place to start would be to get in touch with a financial advisor and get professional help with drafting a valid, signed will. At 1Life Insurance, we have taken our offering a step further by ensuring that this will is retrievable online and accessible 24/7.
If you are going to spend money and time on starting a business, then you need to take all the necessary steps to ensure that it is protected in every way possible. This way, you will preserve and transfer your generational wealth, even after you are gone – securing the financial future of your loved ones.