Unexpected events often have bigger risks for business owners than many other people. Family members, employees, and even communities can face devastating consequences due to a business owner’s death or permanent incapacitation. Fortunately, there is a way to mitigate the risk of unexpected events wreaking havoc on you, your business, your family, your employees, and your plans for a successful future.
The Protector
Bud Ewing had been lucky to survive his stroke. His doctors anticipated that it would take him years to regain his abilities to care for himself again. His wife, Polly, was staring down a seemingly insurmountable task: figuring out what to do with Bud’s business while giving him the care he needed.
While Bud recuperated in the hospital, Polly received a phone call from one of Bud’s business advisors requesting some of her time for a meeting. Polly dreaded the meeting because she had no desire or experience running a business.
At the meeting, Bud’s advisor shared the first good news Polly had heard in quite some time. Bud had created a plan to address what to do with the business if something ever happened to him.
He wanted three of his longtime managers, people who had worked for him for over 25 years, to take the reins of the business and decision making while Bud kept ownership (and continued to draw a salary). His advisors had helped him craft a strategy to retain these managers to run the business with well-compensated, vesting bonuses based on performance.
He had purchased several insurance policies to cover the immediate costs of any of his disabilities.
And upon his death or permanent incapacitation, his plan to begin finding a third-party buyer for the business would begin, which would allow Polly and him to attain financial security.
All he needed was for Polly to give his advisors the go-ahead to enact his plan.
The benefits of business continuity plans
Business continuity plans can benefit business owners even if they never have to be enacted.
The plans can help owners strategize to expect the unexpected while things are going well. This can remove the chaos and reactivity of others needing to adjust to a catastrophe in the moment. Remember, your family, employees, and business leaders may not have the means or ability to react in ways that are in everyone’s best interest in the midst of a crisis.
Business continuity plans also encourage business owners to investigate potential weaknesses in their businesses. In many cases, a business will fail if the owner cannot continue running it, since no one can properly take over the essential functions immediately after the unexpected event. In Bud’s case, he looked ahead and chose people who could best keep his business running well if he had to leave it unexpectedly.
Continuity plans can also provide stability to people who rely on your business to support their lifestyles. Bud’s wife, Polly, likely couldn’t have run the business herself even if she had the skills needed because she wanted to focus on taking care of Bud. Bud’s foresight allowed him to anticipate that disability payments and a continuing salary might be needed to provide for his care.
Staying calm in the midst of chaos
A Business continuity plan can give you a voice when you cannot speak for yourself. Properly done, the plan should consider many elements of your personal and business goals, along with the strategies and finances needed to reach those goals, while acting as a safety net if you cannot enact those plans yourself.
A business continuity plan should provide guidance on these items, among others:
- What to do with the business upon your death or incapacitation
- How to access important accounts and passwords, such as bank accounts, business loan accounts, and additional business documents
- The employees and advisors to contact to begin executing the plans
- Who should be responsible for leading various aspects of your business
Without a business continuity plan, it may be unclear who’s in charge of what, creating chaos with negative effects on people you support and care about.
We strive to help business owners identify and prioritize their objectives with respect to their businesses, their employees, and their families. If you have questions on this topic, we can help with more information or a referral to another experienced professional. Please feel free to contact us at your convenience.
Imagine a world where your financial advisor, attorney, accountant, insurance specialist, and property/casualty advisor all worked together, like a board of directors on your behalf. This is the type of Collaborative Advisory Team approach we take in our practice. For many driven entrepreneurs, executives, and high-net-worth individuals, a Collaborative Advisory Team of professionals is the most effective and efficient way to achieve your optimal financial world. At Moneta, we’re reinventing the way you experience wealth management.
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Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.
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