The strongest businesses often have written plans for how to address unexpected events and mitigate risk, known as business continuity instructions. Their owners ask questions like, “What happens if a co-owner or I die?”, “How do we protect key employees from competitors?”, and “How do we address interruptions in our supply chain?” Here are three major items to consider as you create your own written business continuity instructions.
Much like an emergency on an airplane, you need to focus on protecting yourself before you can begin protecting others. One of the most important questions to ask at the outset of your planning is, “Can this business survive without me?”
If the answer is “No,” business continuity instructions can help you begin the process of figuring out how to make yourself dispensable to the business.
If the answer is “Yes,” business continuity instructions can answer the question, “How?”
This is because business continuity instructions ask and answer important questions about your business’ strengths and weaknesses with and without you, in writing. For instance, if you tend to use personal guarantees when taking on company debt, what would happen if you were gone and your company’s creditors came calling with claims against your personal estate? What would happen to your business if you no longer provide those personal guarantees?
Additionally, business continuity instructions can provide guidance to your co-owners, employees, and family if you were to die or become incapacitated unexpectedly. For many businesses, final decisions run through the owner. Business continuity instructions can help answer, “What do we do without you?”, and “Who will make this decision?”
While many owners use business continuity instructions to plan for their unexpected absence, they’re also designed to mitigate other kinds of risks and take care of other priorities.
For example, business continuity instructions can be a starting point for how to address the loss of a key employee. Recall that a key employee is someone who has a difficult-to-replace skill and whose absence would harm the company. If such an employee were to leave for a competitor, it could be a double whammy for your company.
In the process of planning for this worst-case scenario, you’ll likely work with your advisor team to entice such employees to forgo other offers (e.g., non-compete agreements, lucrative incentive plans).
Similarly, business continuity instructions can help you minimize risks for your family if something were to go wrong. Without written instructions, your family may find themselves adrift without a compass. By providing written instructions, you can help them sail through stormy seas more smoothly. They need not wonder how you’d handle certain situations if you’ve given the answers in your continuity instructions.
Finally, business continuity instructions can help you better control the uncontrollable. For example, they can provide alternative paths for success if a key customer were to go bankrupt. Additionally, they may be able to help you minimize the effects of macroeconomic issues, like supply chain interruptions or labor shortages. As part of the process of creating your instructions, you’ll think through the events that might adversely impact your business and how you’d handle them.
Your business likely relies on many outside moving pieces (vendors, suppliers, etc.). While it’s impossible for you to control what happens to them, with proper planning, you can reduce the likelihood of an outside failure causing your business’ failure.
Your business is too complex and important to leave risk mitigation to chance. One unexpected problem shouldn’t have the power to topple all of your hard work. Written and disciplined business continuity instructions, updated regularly, can help you continue building your business on solid stone instead of sand.
We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.
We help business owners plan for the single most important financial event of their lives – the transition out of their business.
Get in touch today and find out how we can help you meet your objectives.