By Bill Swan, Principal Consultant
Table of Contents
Running a small business comes with its share of unique challenges, many of which can be anticipated. When something happens to a staff member, for instance, businesses often rely on other employees to pick up the slack or call in temporary help to fill the gap. While these types of issues can be resolved relatively quickly, some unexpected challenges may arise that can have a much greater impact on the business. One of the most important things a small business should prepare for is what happens if the leader—the key person—is suddenly unavailable. Are you ready for the potential consequences of losing the leader of your business for an extended period of time?
Planning for such scenarios is especially critical when you consider the multiple families that depend on the business for their livelihood. While employees may be able to shoulder some extra responsibilities, they can only handle so much before hitting a limit. At a certain point, outside help will be necessary. These are important considerations to ensure your business continues to run smoothly if the unexpected happens. This article explores five key areas to focus on to protect your business from unforeseen challenges.
Protect Your Business
Legal and Ownership Planning:
Is there a clear plan outlining who will take over, and how ownership will transfer? Reviewing and updating critical legal documents, including trusts, wills, estate plans, operating agreements, powers of attorney, and buy-sell agreements is essential in your planning. These steps help prevent unnecessary complications and ensure a smoother transition.
Leadership Structure:
Does your business have a formalized leadership structure? Are there individuals identified as potential long-term leaders? Consider creating an advisory board and establishing clear protocols for major decision-making. This helps ensure that leadership responsibilities are covered, and business decisions do not stall during a possible leadership absence.
Business Documentation:
Comprehensive documentation helps ensure that day-to-day operations will continue without interruption. Ensure all critical business information is documented and accessible. This includes:
- Key client relationships and contracts
- Vendor agreements
- Bank and financial account information
- Passwords and access to systems
- Standard operating procedures (SOPs)
Stakeholder Communication:
Have a communication strategy and plan in place for employees, key clients, suppliers, banks, and finance partners. It will be important to be transparent about the situation, while also ensuring to respect the privacy of those involved. Thoughtful communication can maintain trust and prevent unnecessary confusion or concern.
Financial Planning:
Ensuring your business is financially prepared for unexpected events is essential to protecting your business. Review your insurance policies, including key-person insurance if it is not already in place. Build contingency funds, or work toward creating them. Additionally, assess all outstanding loans or other financial obligations to ensure they are manageable if a leader is absent.
The Next Step: Building Your Business’s Resilience
No one can predict when a major life event will occur – whether if affects the business owner or a team member. For small business leaders, having a plan in place is important, not just for the business but for the families and communities that rely on it. Taking the time to prepare now can help ensure your company stays on track no matter what the future holds.
If you need support in developing a comprehensive plan to protect your business, FIT HR is here to help. We work with trusted attorneys and insurance brokers to provide the guidance and resources your business needs. Contact us today to get started on securing your business’s future.