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Value Creation Blog

5 Reasons A Stay Bonus Is Really Important In A Disaster Plan

Posted by Josh Patrick

Stay BonusI write a lot about the use of a stay bonus when you’re going to exit your business.  Keeping your key people is often the difference between a great buyout price and one that is so, so. 

If a stay bonus is important in exit planning, it becomes even more important in the event of the death or disability of the business owner.  In this case, it can mean getting some value for the business or getting almost nothing.

Just to review, a stay bonus is an agreement between the business and key managers that if they are to stay for a period of time after a triggering event such as death, disability or sale of the company, the manager is entitled to a bonus.  This bonus amount is usually anywhere from six months to two years salary depending on how important it is to keep the key person around.

Here are five reasons you might want to have a stay bonus in your company:

  • In the case of being disabled, there might be something for you to come back to after your disability is dealt with.
  • In the case of the owner dying, his or her family might be able to get some value from the business with the help of its key people.
  • Your key people would be likely to stay with the business during a transition if a disaster hits the owner of the business.
  • Your key people will know that you are thinking about their best interest and know that you are concerned that they are treated fairly if you’re not able to be around the business.
  • Your family will know that they can count on your key people to help in the case you become incapacitated.

No one likes to do disaster planning.  I believe planning for your own demise is at least uncomfortable if not downright unpleasant.  At the same time this planning can be very important.

As always, I’m interested in hearing what you have to say about disaster planning and what sort of plans you have in place for the worst.

I’m also anxious to have you order our special Stage 3-readiness report.  Click on the link below and you’ll be taken to our landing page where you can order your report based on your business and your own particular situation.

And, as always, thanks for reading our posts.

 

Get your complementary Exit Planning Assessment to assess the 18 key areas a buyer would look at in your business.  You will have a call with no charge as well as a report that outlines a projected value of your business, the gap you could fill and strong and weak parts of your business. This assessment and report just might help you stay out of the need to do an earnout when you sell your business.  Click on the button below to start the Exit Planning Assessment.

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Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

This article is published for residents of the United States only.  Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered.  Therefore, a response to a request for information may be delayed.  Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

Topics: enterprise value, stay bonus, disaster plans

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