When going about assessing risk and performing “what if” analysis, the use of what we call The “Deadly D’s” is the best starting point.  How each is handled and/or planned for will determine the success of both the succession plan and the enterprise itself.

Death
This mostly centers on owners, especially majority owners, but it can also include key employees and even a spouse or family member since these events also alter the ongoing management of a business.  Customarily this is handled with life insurance.  Structure of the policy, though, can sometimes create more problems than solutions.

Disability
This is not only an unplanned event, it is usually never “planned for”.  Most business owners do not carry disability insurance or insurance with adequate amounts.  Disability carries a very problematic issue in that the CEO or key employee cannot take a salary when not working – at least such payments are no longer deductible and instead can be considered dividends or worse.

Disagreement/Dissension
Partners, especially 50/50 partners, are so excited when the business starts and almost never deeply disagree.  As time goes by this many times changes and when a major trauma to the business happens, disagreement does happen; how it is handled and even planned for dictates whether the business survives.

Departure
Leaving the business can either harm or help a business depending on reasons.  If not structured properly, the departing shareholder takes key employees, cash (the buyout) and other valuable assets.  Harmful departures can also be created by the departure of key employees.

Divorce
Unfortunately this event is far more common and far more devastating to an enterprise if not handled early on.

Disaster
Natural or man-made disasters must be planned for including fire, theft, weather related and so forth.

Disappointment
When “things don’t go as planned” disappointment sets in – and this is or becomes serious disappointment it can lead to division and improper use of assets and resources.  In most cases, disappointment is sensed by employees and they usually leave sooner than the resolution to the results of disappointment.

Demand
This is the situation when the lender, likely a commercial bank, calls the lending relationship and demands payment of all loans leaving the enterprise without key working capital liquidity.  Customarily the shareholders of such enterprises personally guaranty the debt creating even more harm to business and family.  With banking backgrounds we know how to plan and handle these situations so business can continue.

Deviation
Shareholders love plans, even the ones never written down, but understood.  When one or two managers/shareholders begin to run the enterprise, or their part of the enterprise differently, trust issues arise and division among management is not far behind.  From this point, if unchecked, disaster for the enterprise is inevitable.

Defiance
A better name for this may be mutiny.  This happens when a minority of shareholders rise up to majority shareholder(s).  It can happen with employees as well with most cases groups of employees deciding to go it alone, becoming business owners and ultimately competition.

There are many methods to handle each of these conditions and the earlier they are planned and measured, the better the enterprise. shareholders and ultimately the succession plan will be.  Leaving any of these to chance usually results in much higher costs and even demise of the enterprise.