Ships run lifeboat drills for two reasons. The crew finds out whether the boat does what it is supposed to do, and if something is wrong, they learn it on a calm afternoon rather than during the emergency.
A lifeboat drill for a family business means walking through what-if scenarios to test whether the legal and financial arrangements you already have hold up under the pressure of extenuating circumstances.
A family running the drill might find that the shareholders’ agreement contradicts the will, or that nobody besides the founder is a signatory on the accounts. Both of these are fixable on an ordinary Tuesday and nearly unfixable in the week after a funeral.
This article extends the drill to other dire circumstances. It further explains what a red flag in these scenarios will tell you about the strength of your succession planning.
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