In this episode of Startups For The Rest Of Us, Rob and Mike discuss a listener question about planning for your imminent demise. They talk about how to prepare for the worst and give examples of things they have put in place themselves.
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Mike [00:00]: In this episode of Startups For the Rest of Us, Rob and I are going to be talking about planning for your imminent demise. This is Startups For the Rest of Us, episode 272. Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Mike.
Rob [00:24]: And I’m Rob.
Mike [00:28]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week Rob?
Rob [00:37]: Something big is coming Mike. Something big is coming to Drip. It’s our biggest feature since we launched automation in, you know, what 15, 16 months ago. And –
Mike [00:38]: Is it a password reset?
Rob [0:41]: It is not a password reset. You’ve seen this one. You know what’s coming. It’s going to go live in about a week from when this airs, and we’ve been working on it for months, like five months. And I’m pretty excited about it, man. It’s a bit of an innovation on automation, and it’s going to help people visualize things a little better and just make it a lot easier to build complex flows.
Mike [00:58]: It does look pretty.
Rob [01:00]: Very much. How about you, what’s going on?
Mike [1:00]: Well I took my kids to see the new Star Wars movie a couple weeks ago, and the definition of irony – because my son’s name is Luke – and he has taken to going around telling people Star Wars spoilers like “Han shot first.”
Rob [01:13]: Nice. That’s a great — what is he like seven or eight?
Mike [01:15]: He’s nine.
Rob [1:15]: That’s a great nine year old spoiler. Because my son doesn’t understand the concept of spoilers. You know, when we were young there weren’t spoilers. If you went and told someone within a week after a movie came out, the ending, that was a real bummer. But there wasn’t the spoiler culture. I think without the Internet it wasn’t such a thing, and so I was trying to teach my nine year old also, like, “You can’t tell people what happened. You can’t tell the big parts. Even by accident, don’t mention them.”
Mike [1:38]: We made it clear to our kids, because one of our friends, they’re son, one of his friends had kind of ruined it for him and told him one of the spoilers, and then he almost told our kids but his dad was there. And I think that’s why he didn’t. So we took them one of the first days that it opened just to make sure that that didn’t happen to them. But we also made it very clear to them like, “You’re not to talk about the movie to any of your friends just so you don’t ruin it for them.”
Rob [2:01]: Indeed. So we have a bunch of iTunes reviews. We have 460 worldwide reviews. So we have some new ones I wanted to share with the listeners. We have Jay Carbary from the U.S. He says, “Loving this podcast. Episode topics are interesting. The content is incredibly helpful, and the episode length is perfect. Keep up the great work, Rob and Mike.” We have [Great Llama?] from the U.K. He says, “Keep it up guys. A massive help on a weekly basis. This podcast has helped me focus and fine tune my plays more than any other. I’d be so much further off without it. Your advice has been truly inspirational.” And from “Soccer83” of the U.S. he said, “Heard way too much about this podcast to not check it out. It quickly became one of my absolute favorites. As a bootstrapped entrepreneur myself I listen to a ton of podcasts. This is my favorite. Thanks guys.” Really appreciate the kind words, and even if you don’t have time to go in and write a few sentences, if you could go into iTunes – or whatever podcatcher you use – click that five star rating. It helps us rank higher. It helps keep us motivated and making new episodes.
Mike [2:55]: And if you don’t have access to iTunes, or just don’t want to use their interface because it’s terrible, then you can just write back to us at firstname.lastname@example.org like Matt did. And he said, “Hey Rob and Mike. I love the show. I’ve been listening for a long time, and you guys continue to provide value. I’m bootstrapping a SaaS app as a non-technical founder and have used many actionable tips from the show. While I’ve also made a ton of mistakes I’m starting to see the hard work pay off and I attribute some of that success to your show. Thanks for all that you do, Matt.” And he runs an app over at Converthr.com. So thanks for that Matt. I really appreciate it. I think the only other thing going on is I mentioned that the FounderCafe migration was going on last week and everything went pretty well. There was only two minor issues with a couple of people who couldn’t log in because their usernames were the same as their email addresses. And somebody else had had an issue where some of the emails that were being sent for password resets were getting blocked because the vendor we used for sending out those emails monitors to see whether or not the email bounces. And if it does – for any reason whatsoever – it will no longer send email to that. So it was just a minor issue of finding the person’s username and unblocking it from the vendor.
Rob [3:53]: And if you’re not hanging out with a bunch of self-funded, bootstrapped startup founders you should come to FounderCafe.com, enter your email address. And we’re not taking new folks right now, but we are looking to start bringing in new groups here in the next month or two as we get our legs under us with this new platform. So what spurred the topic this week?
Mike [04:14]: Well we got a question to us from Brian and he asks us via email, he said, “I imagine this isn’t something most people want to think about, but if you happen to be a one man show what are some tips for handling your unexpected demise? I keep thinking about the situation of having a SaaS business, monthly charges automatically firing off, and your on ice while your wife is getting things in order and the service hits a glitch. I don’t have a SaaS business at the moment, but my wife would have no idea what to do. Have you guys prepared for the worst?”
Rob [04:38]: So the short answer for me is, “Yes, in general.” Even before I had business partners on the projects I’m working on I had a friend who I had talked to and said “Look, if I kick the bucket I’ve asked Sherry to contact you, and I need you to help her sell them basically.” I mean now it would be a little bit easier now that we have all the brokers around, but I did, kind of, give him general instructions and laid out some simple stuff. Because you’re right, my wife wouldn’t have known the technical side of how to maintain any of that, and there was an understanding that he would help maintain them just long enough until he was able to sell them. And we did have a bit of a vice versa thing were I was going to do that for him as well. And we also have, of course, a will, or a living trust, or whatever you want to set up. And I think that’s, kind of, the fundamental piece you need to have in place. But this really is an edge case that’s not necessarily covered by that, because it’s such a logistical piece of it. And we’re really going to dive into a bunch of steps and other things to keep in mind that Mike has laid out for us.
Mike [05:31]: So I think, as with some of the other episodes that we’ve done on topics that, kind of, touch on anything that is tax or legal related, we have to offer the standard disclaimer; we’re not CPAs and we’re not attorneys, and if you have specific questions about what laws apply to you specifically you really need to reach out to one of them and get their professional thoughts and opinions on it. But that said, here are some of the things that we, kind of, feel are important. And the first on on the list is to have a document that’s accessible to someone that outlines the highlights of the business. And this document needs to be accessible in essentially a secure place. You want it to either be in a safe deposit box, or a keyed safe someplace with a physical and digital copy of everything that needs to be known in order to take things over. Now whether that is simply a username and password that are written down on a piece of paper that you can hand to somebody that gets you into like a Google Docs account and just tells you where that document is that you need to get to, that in itself should probably be sufficient. But again, you need to make sure that that’s under lock and key someplace that it’s not easily accessible, because what you’re really doing is your providing the keys to the kingdom to somebody. And you also have to make sure that that someone is someone that you trust. And as Rob’s mentioned earlier in the episode, he and somebody else have kind of a reciprocity agreement between them that says they’ll do that for each other. But you want to have someone that you can designate that is going too be able to go get that stuff if the need ever arises.
Rob [06:55]: Right, and the reason that this wouldn’t be a great idea to just having a shared Dropbox folder is this is crazy sensitive information. These are like kingdom passwords, your root password and that kind of stuff. So you really don’t necessarily want it to be online unless maybe it had some really extensive encryption, and you had previously agreed on a password that was already handed over to the person. This is very sensitive stuff. The tough part with this is keeping it up to date, because we just forget about it. And so I think even if it’s six months out of date maybe it’s still viable. I think once it’s a year out of date it’s like this stuff’s going to be helpful but it’s not really going to cover it all. So I think that’d be something that you’d want in a calendar reminder that every year you come back in and update this. And this interesting thing is, you know, if you’re a sole founder than you probably need an external person, a developer, or someone, you know, a friend to handle this. If you have co-founders, or business partners, then typically there’s going to be something in your partnership agreement, or your articles of incorporation that specify what happens if one partner dies, and then someone else handles it. So it’s a little more, I would say it’s almost easier if you have business partners, because there’s someone else there to step up and handle this kind of stuff.
Mike [08:01]: And you just mentioned business partnerships there. You have to be a little careful about those as well, because the last I checked it depends on the business structure as to how the business is going to be handled if somebody in the business dies. So for a partnership, generally speaking, that partnership essentially dissolves when one partner dies. So you have to be very careful about whether or not you have a partnership, or an S corporation, or an LLC, and then specifically what the laws in the place that you live are that apply to that business structure, because something like an S corp can live on after you die but a partnership cannot. So you just have to check the laws and make sure you’re aware that the business structure also has an influence on these things. It’s not just about the logistics of handling things. It’s about what happens to the business afterwards as well. The second thing on our list is to make sure that you have a up to date list of the services that you’re using, and what they’re used for. And a lot of times you can pull something like this from your credit card statement. This is actually a very good way to keep that up to date, is if you’re paying for monthly services – or even annual subscriptions to different things – it’s very easy to go back and look at your last 12 months of credit card statements and identify what it is that you’re paying for and be able to make a correlation between those things and the different services that you’re using to run the business. Some things are going to be easier to get rid of, and some things are not. But at the same time, going back to the very first thing on the list is making sure it is documented how to get into those services. Because if you don’t know how to get into those services — and, I guess the primary one would be able to get into your mailbox to be able to do things like password resets at a very bare minimum. But also if you have the ability to authenticate to those different services, whether it’s a spreadsheet of passwords or credentials to a password manager, you need a way to be able to access those things. So the first part of that is just being able to have that list of services, and then being able to access all of them.
Rob [09:55]: That password manager is key here, so you don’t have to spell all these out on paper, on a thumb drive, in plain text or something. Just being able to give them a single password to your OnePass or your LastPass account is going to be a huge help. And you don’t have to then keep that updated, because you are automatically doing that in your day to day course of business. So it’s not some external thing that’s going to get out of date as you change passwords. I had to do this recently – make a list of all the services we were using – because when we spun Drip out as its own corporation, got a new bank account, new credit cards and all that stuff, that all that had to be transferred over. I did exactly what you said. I basically just went to the [Numa?] Group credit card, and I only looked back for maybe 45, 60 days. I know there’s some annual stuff that I may have missed that will come through later, but I skimmed through it, made a list, and I think there were about 30 services. Somewhere in that range. Like between, let’s say, 25 and 35 services, and I just logged in one by one, updated the credit card info and took care of it. So depending on how many you’re using, and what you have going on, this can take up to, I’d say, a few hours to take care of.
Mike [11:02]: The next thing on the list is making sure that the basic accounting information for the business is available. And that includes not just the statements themselves and how all the different financials are doing – because you might use something like Xero, or LessAccounting, or QuickBooks or all these different things to import all your banking statements – but you also need to be able to make sure that they can get into those bank accounts and look at the up-to-date banking information and credit card information so that they can continue to accept the payments on behalf of the business, and continue making bill payments based on the business. That also includes things like your payment providers. Whether you’re using Authorize.net, or Stripe, or anything like that, you need somebody to be able to get into those. And there’s kind of a, I’ll a little caveat here, or a little wrench in the works, which is that in order for somebody to log in from a new computer they may need to answer some sensitive questions about you, or where you went to school, or who your girlfriend was in fifth grade, or something like that. So you may very well need to document some of those sensitive questions that a bank might have asked you a long time ago. So those are the types of things you need to keep in mind when you’re documenting some of this stuff, because that is going to be important for them to get access to your accounts.
Rob [12:12]: And this one’s tough, because you really want to keep this stuff under wraps. So it’s not like something you want to have written on a plain piece of paper and sitting in a desk drawer somewhere. You really need to think seriously about the security of this info.
Mike [12:25]: Is now an appropriate time to go into the lack of security of that info by the U.S. government, and they lost every single piece of information on me including my fingerprints last year?
Rob [12:32]: Did they really?
Mike [12:34]: Yes.
Rob [12:35]: And by lost they mean sold them to the highest bidder or something?
Mike [12:37]: I really don’t know. I just got a letter in the mail from them saying, “Hey, by the way, we did a background check on you, and we lost every single piece of information on you dating back 15 years, including your fingerprints. So just 3D print yourself some new ones.
Rob [12:52]: Finally I’m clear. Now you can go commit a crime and no one will find you. Is that the idea?
Mike [12:56]: Or, you know, everybody will find me. I don’t know.
Rob [13:00]: Yeah, or they’ll certainly overhear you. It’s a bit of an aside but there’s this movie called “Citizen 4”. Have you seen it?
Mike [13:06]: I’ve heard of it. I have not seen it.
Rob [13:09]: It’s Edward Snowden. It’s a documentary on when he was actually doing the leaks, and it is just frightful. It is unbelievable. If you haven’t watched this, I highly, highly recommend it. It’s on HBO. It’s about that topic, about keeping stuff secure, and how really it’s all just an illusion of security. Anyways, I think there’s a difference here between we’re talking about having passwords and your fifth grade girlfriend written down somewhere. Yes, the government could probably find those and they could subpoena them and they could get that kind of stuff. But not particularly worried about that in this case. This is more about someone stumbling upon them, or copies getting made, or coming into the wrong hands of someone who wants to do something nefarious with them.
Mike [13:44]: Of course. It was just a side anecdote of it almost doesn’t matter how secure you are in the things that you do, it’s more that you’re almost at the mercy of wherever you store or put that information. So it’s only as strong as the weakest link, and unfortunately the government does not appear to have been a very strong link in that case. So moving on, the fourth one is to make sure that you have some basic information about the different technologies you’re using. Whether that’s different servers, and you have them hosted over in Azure, or AWS, or some basic technical layouts of how some of the different pieces fit together. What you’re really looking for is the ability to hand off some basic documentation about how your infrastructure is built or put together. And this is especially useful if you have multiple servers that are running your SaaS application that need to talk to one another. Because if any one of those goes down, you’re application is probably dead in the water. And if that happens your website might be up and running, but it’s not obvious or clear that there are other things in the background that are wrong. So if you have something like that that you’re able to hand off to somebody who is technical in nature, that they can take that and at least be able to figure out at a fundamental level where things are and how they fit together, then they can troubleshoot any major infrastructure problems.
Rob [14:59]: An interesting point here is that having a contract, let’s say a contract developer who works for you is actually a risk mitigation factor in this case. Because let’s say you’re the only developer, and only owner, and only founder of this company, and it’s just a one person shop, if you die and someone needs to take it over it is really someone entering into your world, and you have to have this kind of documentation. And you have to keep it up to date. I mean it’s going to be really hard for someone to get up to speed with it. But if you had just a single developer who also worked on it, and you then just had his or her contact information, if you were to die then someone would be able to contact them and at least keep them going. Kind of like when you transfer a sale of a business. If you can keep the contractors on it’s a lot easier to keep it going. So I’m not saying that if you don’t have contractors that you should hire them, but it is an interesting thing to think about of that it could essentially be more stable and outlive you if you do have other things in place, and other kind of stop-gap measures in place, and other people who are familiar with it. So that “bus factor” — you know, you’ve heard that phrase ‘the bus factor’? If you get hit by a bus who takes this over? And right now we’re kind of saying, “Well you just write it on a paper.” But I actually think having another human being involved to that degree might be worthwhile when you hit a certain point of success.
Mike [16:09]: And that leads us directly into the fifth item on our list which is to have contact information for those contractors readily available so that if operational decisions need to be made, or you need in depth technical information about anything that’s going on, or something that’s been deployed those people are going to probably know a heck of a lot more about it than anybody who’s stepping into your shoes to fill in. So, as long as you make sure that you have documented that, or even just pointed out where it can be found, I don’t think you need to report back line by line, “This contractor worked for me from this time period to this time period.” If you’re hiring them through an online platform such as Upwork, or a variety of other ones, that can really be helpful because then the person just has one place to go to and they can see a lot of that contractor history. So having all that stuff consolidated in one place can be really helpful. Another thing that would be helpful is if you have that wired into your payroll provider, and if you’re paying them through that payroll provider then it makes it a lot easier for the person to have just one or maybe two places to go through. So you can just point them to those – to Upwork.com and I use – it used to be called Zen Payroll – but now it’s Gusto.com. But I can point somebody to those two places and that would take care of everything. So I think those are the main points that we wanted to touch on, but there’s some, kind of, addendums to some of this information. Early on we pointed out that it’d be wise to designate somebody who you trust who can temporarily take over. And one of the reasons for that is that your family is probably going to be too busy and having too many other things going on to want to deal with the business directly. And essentially what this person will do is they’ll serve as something of a firewall between your business and your family. So they interject themselves in there to handle those things, and take care of things, and make sure that your family doesn’t have to think about or deal with any of that stuff.
Rob [17:54]: Another thing to think about is your family is probably going to have zero interest, or ability, to carry on the business. So I think that – one of the first things that I’ve thought about – is how do you come up with ideas for how to either sell your share, or sell the whole thing, and liquidate the business? And I think documenting some basic steps on how to do that or – as we talked about earlier – kind of, appointing someone to assist with that is a big deal. Now I think if you have a child or, I don’t know, someone else who might want to take it over who’s in your family — because I’ve often thought about my kids. My oldest child is nine and at this point he couldn’t take over the business, but he’s writing code now, and if when he hits 18 or 20 he wanted to be part of that and have some type of say in whether it got sold off when I died, or he was able to take it over I’d like to have that conversation. I think that’s worth having. But for most of us, if you don’t have someone in your life like that who’s going to be able, or willing, to take it over then really your best bet for your family is to be able to sell it. And whether you have a broker laid out, or a friend who can help assist that, or if there’s a business partner who essentially has to buy you out per terms in like a corporate arrangement, that’s going to be the best for your family is to get that big lump sum in addition to probably the life insurance that they’re getting.
Mike [19:08]: Another thing to keep in mind is that you could probably document some of these things in your will, but even with a will there’s a couple of different problems associated with that. The first one of which is it takes time to change your will. So it’s not something that you want to do everyday, because you’re probably going to have to have some legal representation review it and make sure everything’s kosher with it. And even if you do it could still be challenged. So you really want to have some basic steps and guidelines in place that can be used in, kind of, an interim fashion until the final decisions are made around that. And that’s really, I think, the main thrust of what we’ve been talking about today; how do you keep things at least minimally operational until you get to a point where your estate can essentially settle the business and decide what to finally do with it?
Rob [19:55]: Right. And I think that if you have a family and you don’t have life insurance at this point that would probably be something that I would seriously consider because I see that as kind of the first line of defense. It’s like the business, selling that and getting it organized and all that stuff, it’s going to take time, and the idea is that life insurance helps right away so that your family’s not in dire straights while things are getting sorted out. And then hopefully the business winds up being a windfall if and when it’s sold.
Mike [20:18]: The other side of that is that life insurance, as you said, is that first line of defense, and I totally see it that way as well, but the fact is that that life insurance could be worth substantially more than what your business is worth depending on where it is. I mean, if your running as a single founder company and you haven’t grown into any number of employees then chances are good that your insurance policy is some very large multiple of whatever your revenue is going to be from selling that business. So you do have to keep those types of things in mind and figure out what the order of resolution for those things are and what the time frames are, because selling a business is not going to be an overnight thing, as you said. So that’s something that you really need to be mindful and aware of, that that’s something that’s going to come down the road. And in terms of making sure the family has short term cash available to them, that life insurance is probably going to be the best bet. But even before that you should probably have a savings account set aside that’s going to take care of the short term between the time that the insurance company gets the official notification and they cut a check to take care of the life insurance policy. Because I don’t know how long that takes. I imagine it’s not like six months to a year, but I can’t imagine it’s anything less than probably several weeks to a month.
Rob [21:25]: So the bottom line is it really boils down to having a basic exit plan and keeping it as up to date as you can and as secure as you can. And so next week we’ll be talking about a topic that’s not such a bummer. Thanks for the downer topic Mike.
Mike [21:38]: Anytime.
Rob [21:37]: So this entire episode was outlined and discussed based on a listener question. If you have your own listener question for us call our voicemail number at 888.801.9690, or email us at email@example.com. Our theme music is an excerpt from We’re Outta Control by MoOt. Used under Creative Commons. Subscribe to us in iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.