Your business owner clients may be indispensable to the business but they are not indestructible. They may be able to leap tall buildings to get the job done, but they are human and subject to the same morbidity and mortality issues faced by the general population. What have you done to help them ensure their retirement and legacy?

On average, 45% of a business owner’s net worth is tied up in his or her business, yet only 26% of small business owners have a succession plan, according to LIMRA’s “Small Business Owners 2005 Report.” Many business owners hope to pass the company to their children or grandchildren, but the statistics on successfully doing so are grim. According to Joseph Astrachan, an editor of Family Business Review, “Less than 30% of family owned businesses survive to the 2nd generation and less than 12% to the 3rd generation, with only a 3% survival rate to the 4th generation.”

If those statistics do not hit home, consider this: The number of business bankruptcies increased 14.2% between 2004 and 2005, according to the U.S. Small Business Administration.

While succession planning is challenging and the number of business bankruptcies is on the rise, your client’s business succession is key to his or her retirement, legacy and the economy. It is also vital to the innovation and continued economic expansion of our nation. Nearly 26 million firms in the United States are considered small businesses, but collectively, they account for half of all non-farm real domestic product. And they generated from 60% to 80% of the net new jobs over the past decade.

Given that women account for more than half of the American population and nearly half of the workforce, it seems reasonable that women-owned businesses are on the rise too. The “2002 Survey of Business Owners, Women-owned Firms,” published by the U.S. Bureau of Census, suggests a strong correlation between business ownership and the economic well-being of women. Yet it is generally accepted that women are the family caregivers; they drop out of the workforce to begin families and raise children. As our population ages, women business owners may also be called upon to drop out of their business to care for an aging parent or ill spouse.

It is imperative that business owners contemplate and work with financial planners to create succession plans for their businesses. That said, often it’s hard to get them to focus on anything other than their business.

During your approach talk, fact-finding or on-going meetings, ask your business owner clients whether they are indispensable to the business. If they say ‘yes,’ have them describe their back-up plan for an extended illness or disability, and their succession plan for retirement or premature death. Then ask them if family members, friends and key players in those plans are capable of running the business and are willing and able to spring into action–today.

Remind your clients that businesses are as dynamic as interpersonal relationships. Ask them if the business has changed since their agreement was penned and if the provisions for valuing the business are still valid. Offer to read and review their buy-sell agreement to help ensure it continues to meet their needs and that there is adequate insurance coverage to support their agreement. Chances are most of them will not have a formal succession plan; and those who do may be unable to put their hands on a dusty buy-sell agreement.

Because many business owners are dependent on the value of their business to fund their retirement and hope to leave the business to a family member, business valuation, succession and continuation planning is a crucial part of the process. It is also important that personal estate planning be coordinated with business succession planning.

Your clients may have children inside, as well as outside, the business. Ask the business owners if all children will be treated equally and at what point they will be ready to sell or transfer ownership to the next generation.

Letting go is difficult for most business owners. Help your clients establish a time line for the smooth and structured transfer of ownership and control as the new management and ownership structure provides cash flow necessary to maintain their lifestyle and retirement income needs.

Put your client on the spot by asking what, as their advisor, they would want you to say to their spouse or loved ones the day after they die. Then sit back and listen. Their answers will impact the retirement, legacy, and peace of mind of your client, their family, and the footprint of their business.

Business owners face the same risks of disability and premature death as the general population, but they also face the particular challenges of succession planning within the complexities of family and interpersonal relationships. It is up to you to help them plan for how they will monetize and redeploy the net worth tied up in their business to meet their ongoing needs.

Kathy F. Hartin, MBA, CPA, CFP, is director of planning for Lincoln Financial Network in Houston, Texas. She can be reached at .