Protect Your Business (and more) with a Business Continuity Plan

When your business is looking good – you may not be thinking about an exit or transition plan. I hear it from business owners all the time: “I don’t need your services right now. We’re focused on growing, not exiting.” It’s true. Your business can operate without an exit plan. But what happens when there’s a family crisis, a serious illness, or unexpected disability or death? Your hard-earned business will most likely fall apart. The truth is – you need a Business Continuity Plan from the first day you open your doors. It’s not an exit plan – it’s a “stay in business” plan. I believe every business owner is obligated to provide this security to their family, employees, customers, and community.

What’s a Business Continuity Plan?

A friend once told me about a teenage daughter who liked to burn candles in her third-floor bedroom in their historic Cleveland Heights home. One night she left a candle burning and fell asleep – then woke in a panic to a smoke-filled room, trying to find her way out. Firefighters had to carry her through a window. The entire house burned to the ground that night. Thankfully, the family survived.  But it struck me — who can plan a smart exit route when your house is burning down? For small businesses, a Business Continuity Plan provides answers to tough questions when “the house is burning down.” It only takes about four hours to create a solid Business Continuity Plan – but that plan has the power to keep your business operational during a short or extended crisis. It tells who to call, including trusted advisors and key employees critical to running the business. It lists the actions needed in the first 30 days to protect your business – from a competitor raiding customers and other threats to the value of your business. A good plan also includes:

• Documents vital to preserving the business, such as salary-continuation plans
• List of all business Life & Disability insurance coverages – essential for a surviving spouse to maintain liquidity
• List of potential buyers of the business whom the surviving spouse or others can contact
• Organizational chart specifying who would manage the business if the owner became incapacitated
• Important customers and vendors to contact – in order to assure them a plan is in place and it’s “business as usual”
• Letter of instruction from the owner outlining the challenges that will arise and the best solutions to address them

One of the most important elements in the plan is an incentive to keep key management from deserting the business during a rough spot. We’ve been successful in developing “stay bonus” plans before anything happens to the owner. It assures nervous employees that a financial reward equal to one or two times their salary will be provided after a 12-24-month period. It’s a powerful incentive to ensure their help in keeping the company running and making it attractive for transitioning or selling to a third party.

4-Hour Investment = Peace of Mind for Owner + Employees

Business was booming for one small business owner in Northeast Ohio – but he was smart enough to know his key employees were nervous about their own future if a day came when he couldn’t run the company. We spent about four hours developing his Business Continuity Plan and then helped him communicate the plan to key managers. Sitting around a table in their conference room, we walked through the plan together, including a “stay bonus plan” for those key managers. To a person, every employee thanked the owner for taking the time to ease their concerns – and much to my surprise, they turned to thank me and Legacy Business Advisors for giving them peace of mind. The take-away: At any stage in your company’s lifecycle, a Business Continuity Plan is critical. It’s even more important than your personal estate plan – because it impacts so many other people. Things happen – whether a family crisis, serious illness or unexpected death.  Set aside four hours – to protect your business, your employees, family, customers, vendors and community.   Mark Dorman is passionate about helping small businesses plan for success and achieve peace of mind. He’s worked with business owners for more than 30 years and is founder and president of Legacy Business Advisors. For the past 15 years Mark has focused on transition planning and exit strategies. He is also founder and managing partner of TAB Western Reserve (The Alternative Board), a peer coaching and advisory group for small business owners.