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Preparing For the Ultimate Disaster

General Business News

January 2007

Preparing For the Ultimate Disaster

You've worked hard and built a thriving business. You have a strong base of loyal customers, your employees are happy, and - most importantly - you are happy.

There's only one problem with this picture: not only do you run the company, you are the company. You open up in the morning and are generally the last one to leave. You are so involved in day-to-day management that operations suffer when you are not at work. Perhaps that's the way you like it, but what happens if the ultimate disaster occurs and you cannot work anymore?

The Ultimate Disaster

Now that we've mentioned the ultimate disaster, let's define it. The ultimate disaster for our purposes is anything that prevents you from continuing to work in your business at a meaningful level. Some examples might be: you have health problems that prevent you from working, a relative has health problems that take you away from work, you are permanently disabled, or you die.

Too often, business owners prepare contingency plans around external risks and forget their own vulnerabilities. Preparing for a natural disaster or computer crash is essential, but if you don't provide for the continuation of your business in the event of your death or disability, you put your family and employees at risk.


How you plan for the continuation of your business depends on many things. Among those concerns, you need to take into account the type of business, the makeup of your current workforce, your customer base, and family dynamics.

Type of Business

In what industry does your company operate? Is it a small convenience store or perhaps a chain of convenience stores? Perhaps it's a small manufacturer or construction company?

The industry in which your company operates will have a major effect on your plans. For example, it may be more important to have a 'people person' waiting in the wings to take over for you, if customer relationships are a key part of your business. On the other hand, if you have a sales force that services your customers, and you are primarily a manager and policy maker, you may want to have someone with strong organizational and management skills.

Current Workforce

Who do you currently have working in your company? Do you have just a few people with no apparent managerial skills? Do your employees feel comfortable challenging you if they see a more efficient way to run the company?

What you need in your current workforce is someone who thinks independently and can take the reins of the business if you are not there. Assuming your 'successor in training' is willing, you need to train him or her to assume your duties while you are still active in the business. This means you must give them the ability to make decisions, make mistakes, and learn from those mistakes. If you find your current team does not have the depth you need, find qualified employees who will meet those needs.

What happens if you don't have a workforce in place? Perhaps you are too small to have employees. In this instance, you might want to explore a buyout plan with a competitor. This could, of course, be tricky - and you will need legal counsel to protect your interests.

Customer Base

The key to the survival of your business will be keeping your customers happy. All the management expertise in the world is useless if customers leave because you are not in the picture.

If you've kept customer contacts to yourself for fear of losing control, maybe it's time to rethink. You should always have a backup person who is familiar with your clients and can interact well with them. Customers will work with whoever makes them feel comfortable, so give them a chance to get comfortable with someone in your company other than you.

Family Dynamics

Do you have family members currently working in the business? Did you plan on a child, or children, taking over the business when you retire? How well do members of your family work together?

One of your main goals should be to minimize the impact of your disability or death on your family. Take the time to look at each member's strengths and weaknesses. Then, decide who should work in the business based on your knowledge of what is needed to run the company.

Finally, communicate your desires to the family. There may be hurt feelings and arguments, but addressing them now will make life easier for all concerned if the ultimate disaster does happen.

Concluding Thoughts

It's hard to consider your own mortality, but it's also necessary. If you own a business, you owe it to yourself, your family, and your employees to provide for continuation of the business if you cannot work. Take the time now to develop a succession plan and communicate it to those who need to know. If you have any questions or need any help, feel free to contact us. We are here for you.

Happy New Year.

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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