Business Continuity Planning
Plan For What’s Coming
As a business owner, an enormous amount of your wealth and income is tied up in a single asset; your business. Any significant interruption in the business could put the business in a tailspin, destroying wealth, eliminating income, and placing family at significant financial risk.
A Business Continuity Plan identifies the myriad of risks facing your business and develop a plan to manage risks alongside the financial, legal, tax, estate planning, and business management implications.
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Each coaching session, we'll go over the biggest issues, challenges, and opportunities facing your business. We'll also work through a structured process which will ensure every strategic aspect of your business is addressed on a regular basis. Business Coaching includes identifying and overcoming challenges related to:
Continuity Plans Include
Identification and training of a new owner/operator
Determining risk exposures to the business and the owner
Developing a risk mitigation and management plan
Determining key insurance policies and coverage amounts
Identifying necessary legal documents
Such as powers of attorney to keep the business running
Multi-year tax planning to minimize lifetime tax liabilities
Estate planning to ensure a smooth transition of ownership and minimal estate/gift taxes
Owner/operator retirement planning
Management & culture transition planning
Continuity plans start at $800 $200 per month for Monthly Coaching Sessions
Questions regarding business continuity plans
--How can you prepare for the day when you may not be able to continue running your business?
The best way to prepare is to develop a comprehensive business continuity plan, which should include details on how to keep the business running under a wide variety of unexpected occurrences.
--What are some basic tips?
There are no basic tips other than work with a professional. These plans are extremely complex and not only must deal with a wide variety of potential risks, but also with the financial, legal, tax, estate planning, and business management implications. Good business continuity plans should be created by someone familiar with both business planning and a wide variety of financial planning subjects. Sadly, many continuity plans are implemented by insurance agents who only deal with the insurance-related issues, or lawyers who may only deal with the legal issues. A comprehensive plan will include identification and training of a new owner/operator, a variety of key insurances, legal documents such as powers of attorney to keep the business running, integration with tax and estate planning, and many more issues.
--Why is it important for a small business owner to prepare for worst case scenario?
A business owner has an enormous amount of their wealth and income tied up in a single asset; their business. Any significant interruption in the business could put the business in a tailspin, destroying the business owner's wealth, eliminating their income, and placing their family at significant financial risk. Unfortunately, 'the worst' doesn't need to happen to the owner in order for the business to experience its 'worst case.' The death of the business owner isn't the only thing which must be planned for. The plan must also deal with owners becoming disabled, extremely ill, losing their professional license, or just being 'trapped' overseas as was the case for many business owners after 9-11. Similarly, a major fire at the business, the loss of a key employee, or other unforeseen problems could slow the business operations sufficiently to threaten the business.
--How can a small business owner fight “founder dependence” or the belief that your small business cannot run without you at the helm?
Owners can hire a business coach or find a mentor who can guide them through these feelings and concerns. The owner should start small by identifying key employees or family members who you can mentor and guide into the role of an heir. Then allow the heir to 100% take over the business while you go on a week-long vacation. Don't check e-mail or phone messages while on vacation and allow the heir to truly run the business. There is very little damage an heir can do in a week which the business owner can't fix when they return. This will give both the heir and the business owner a cushion of psychological comfort about the transition.
--When should a small business owner start planning for the worst? Do you start planning on day one? If yes or no, please explain why.
Business owners should begin planning from day-one for interruptions to their business. This may start as simply as figuring out how the business would run if the owner get the flu or goes on vacation. As the business becomes more valuable, however, more time and effort should be spent on planning for the continued operation of the business.
--How does preparing for the worst tie in with other business preparations, such as general your business plan? Does it tie in? If yes or no, please explain why.
A business continuity plan should be integrated with the general business plan, although much of the continuity plan will carry over from year to year. As the business grows and changes, however, the business continuity plan should evolve along with it. And the business continuity plan should be updated to ensure it conforms to the long-term vision and direction the owner has for the business.
--What is something that a small business owner might overlook when planning?
The list of what owners overlook in continuity planning is nearly endless, as the subject of business continuity planning is so vast and complex. The biggest risk which is often overlooked, however, is the risk of disability. A business owner is far more likely to be disabled than die prematurely, and yet very few have proper disability insurance to cover their family and their business if they were to become disabled. Another major item which is often overlooked is finding a buyer for the business as a contingency plan if the main plan falls through.
--Where can small business owners find help in the process?
Talk with a fee-only and fiduciary financial planner who has experience in dealing with these issues, as they are uniquely qualified to deal with integrating the legal, tax, investment, insurance, and management implications. Make sure to ask if they regularly work with small business owners, as many financial planners don't have experience with the unique financial planning needs of business owners. I offer a free consultation for business owners to explore the potential risks they are exposed to and the business owner's desire for their small business.
--Is there anything else you would like to add?
I have seen many businesses die with the death or disability of the owner because they didn't plan for the problem. One business in particular comes to mind, in which neither the father who started the business nor the son who was to inherit the business wanted to deal with these issues. Even though the son grew up working in the business, in less than a year after the father contracted cancer, the business was out of business. In seemingly the blink of an eye, the business the father spent forty years to build was gone, leaving the surviving wife and family with next to nothing for their care.