What happens to your family, your employees, your business and your customers… if you exit your business before you plan to? It’s a real concern in the business exit planning process and one that is addressed with the Business Continuity Plan.
In today’s video, you’ll learn:
- Why it’s extremely important to have a detailed Business Continuity Plan in place
- The step by step process in creating your own Continuity Plan
- Challenges you might encounter when unexpectedly exiting your business and how those can be addressed.
Click here to watch the full video or read the full video transcript, below.
How To Create Your Business Continuity Plan
In a previous video, I introduced you to the topic of business continuity planning. Here’s a link to watch that video >>>https://bit.ly/2OPNhiR which I would suggest doing as a primary to this video.
In this video, I’m going to walk you through a sample business continuity plan and show you what is included in it. You can create one of these on your own or at True North, we can create one of these for you!
The Business Continuity Plan: Your Step-By-Step Guide
Page 1: Letter To Your Family
On the very first page of the continuity plan, is a letter to your families. How nice would it be that your family has a detailed heartfelt letter from you, when you exit your business unexpectedly.
Page 2: Trusted Advisors
You would list financial advisors, exit planning advisors, your CPA, your business attorney, insurance agent, etc. It should be very clear how to find these people so that we can bring them in and have them assist with the implementation of the business continuity plan.
Page 3: Immediate Contact
Who should be contacted immediately following death or incapacitation? For example, who your spouse/significant other should contact first for help with working through business issues. This is the primary person that they should reach out to because if your spouse is not heavily involved in the business, it may not be clear to them who they should contact. We need to spell this out in detail.
Also, you want to designate someone who’s going to take over and fulfill your role, even if temporarily, until a permanent replacement is found.
- Who should inform all employees and how should that happen?
- Should it be in person, should it be over the phone?
- Who should inform your customers or clients?
- How should they be informed?
Page 4: Existing Arrangements
An example of an existing arrangement would be a buy-sell agreement. This is also where you would list any business owned insurance, any personal insurance policies, estate planning documents that are related to the business buy-sell agreements.You would put the date that these were implemented and where a copy can be found.
Page 5: Disposition Of The Business
This is where you address the disposition of the business.
- Do you want to transfer to an inside person? If so, we need to know who that person is or who those people are.
- Do you want to transfer to an outside third party? This is where you would list also people who have expressed interest in purchasing your business in the past. We want to list who they are, what you know, what their connection is and who they’re associated with.
- You can specify in this section the minimum price that you want to receive for the business so that your family knows not to accept low ball offers if the business is worth more.
Page 6: Management Responsibilities
Who is going to take over management responsibilities, oversee operations, financial decisions and oversee administration? We want to spell out all those people. These people may already be in place, but things may change if you become incapacitated or if you die.
Challenges & Solutions
There are some challenges and solutions that can be anticipated and addressed in the business continuity instructions.
Loss of Income: If this is a business that’s generating $400,000 of income, how do you replace that income for your family?
Business Value Drops: In most cases when a business owner dies unexpectedly, particularly a closely held business, the value of the business erodes. We can address some of these challenges and what you, as the business owner, can do to help prevent that from becoming catastrophic.
Loans, Lines of Credit: If you have business lines of credit, bank loans, things like that, those can be catastrophic. If the bank says, “Oh, well Joe’s no longer running the business, sorry we’re going to call that loan right now and you’re going to have to pay us back.” There’s no process in place to make sure that weeks don’t go by before someone can access that important data, if ever.
Payroll, Financial & Bank Accounts, Etc.: How do we continue with payroll, especially if you were the person in charge of that. How do we get access to the financial accounts, the bank accounts, etc.
Do You Have Questions About A Business Continuity Plan?
We have a template that we use for clients and it takes about an hour to go through. You may need to gather some additional data, but in under an hour, we can get the basis and the foundation for a solid business continuity plan put into your hands!