Each month, we put your most pressing financial planning questions to our CEO Steve Martin and COO Dr Mark Todman, in our Ask Smart Financial blog series.
Today, Mark explores the difficult but urgent issue of business continuity planning.
“I’d like to start with a note on what I classify as business continuity planning in this context.
“Business continuity planning refers to the defined process that will enable critical business functions to run in the event of a serious disruption. In this case, the serious disruption I’d like to focus on is the absence, illness or even death of a business owner.
“No one likes to think about what would happen if we got sick, had an accident or even died. When we’re busy running businesses, raising families and planning our lives, we rarely factor worst-case scenarios in. I’ve had these conversations with my own clients – I understand how difficult it is to face up to events beyond our control.
“While I can’t help you predict the future of your health, I can help you ensure you’ll be prepared for the impact on your business, should the worst happen.
If Today Was Your Last Day…
“Let’s suppose that today was your last day in the business. Tomorrow you won’t be there. What would happen?
“Initially, there are short-term practical concerns. Who would assume responsibility in your absence? Does everyone have the access they need to key systems and documents? Can someone make important financial decisions needed to keep the business running?
Tip – Consider writing a detailed operations manual to ensure vital business knowledge is accessible to key people.
“Going up a level, who do you want to assume ownership of the business? You may have always envisioned your children succeeding you, or have hoped your management team could take over when the time comes. The time may well come much sooner than expected, so it’s time to solidify your desires.
Tip – Begin these conversations today. You need to communicate with the people involved to manage expectations as early as possible.
Continuity Planning and Sellability
“There are other, sound commercial reasons to create a business continuity plan.
“Demonstrating that your business can run without you will give you a strong competitive advantage, should you wish to sell.
“A business that can demonstrate its ability to weather serious disruption and function independently of its owner is a business worth acquiring. Consequently, business continuity planning can be considered an integral part of value creation and sellability.
Protecting Your People
“Perhaps the most important benefit of all, business continuity planning helps protect the people in your life.
“From your loved family members to the loyal employees you have known and trusted for many years, creating such a plan reduces the potential for tension, misunderstanding or relationship breakdowns among the people you need to carry your legacy forward.
“There’s no easy way to say it – this is a plan you must start creating as soon as possible, but it’s not a plan you need to develop alone. Professional financial planning for your business will help you understand the legal and tax implications of your options and further protect your loved ones from any fallout.
“Do you have a business continuity plan? What do you think are the biggest challenges to business continuity? I’d love to know, so leave your thoughts in the comments below.”