Many business owners are missing a crucial link between their time as business owners and their time after owning their businesses. This missing link is called Business Continuity Instructions, and it could be the difference between the success and failure of your ownership journey.
Today, we’ll look at what Business Continuity Instructions are, why they’re important, and three reasons why you should consider implementing them as you create comprehensive Business Continuity Instructions.
What Do Business Continuity Instructions Do?
Business Continuity Instructions give your family, co-owners and employees, and advisors a road map for what should happen to your business if you are forced to leave it unexpectedly.
These instructions can be used in extreme situations, such as an unexpected death or permanent incapacitation, or for more common instances that prevent you from running the business for an extended period of time, such as a divorce or long-term illness.
It’s easy to confuse Business Continuity Instructions with an estate plan or will. While there are common elements to each, particularly in the realm of what to do with the finances, Business Continuity Instructions are a living document that provides guidance about what to do with the business to position business owners to achieve their goals even if they can no longer run the business.
Why They’re Important
For many small and mid-sized companies, many of the most important decisions run through the business owner. If you or a co-owner were unable to make a big decision, what effect would it have on your business and your long-term goals?
Take an extreme example: unexpected death. If you were to die suddenly, who would run your business? What would the outcome of having this new leadership be? Would your family know where to begin regarding finances and business responsibilities? Does anyone know the password to the company credit card system so they can continue to make purchases that keep the business running?
Or consider a more common example: a business owner’s divorce. What would be the consequences of a divorce for the business? Would the ex-spouse be entitled to a share of the company or its profits? Will the divorce proceedings have an effect on your ability to run the business?
These questions are not intended to scare you. However, when you are the hub of your business and major responsibilities fall on your shoulders, if you were ever unable to run your business, many of these questions would require answers.
Business Continuity Instructions are a strategy that business owners can use to answer questions like these when they cannot physically do so themselves. This could help the business survive and even thrive without you at the helm, which may position you to achieve short- and long-term goals more effectively.
3 Benefits of Business Continuity Instructions
There are numerous factors that go into building Business Continuity Instructions for your business. Let’s look at three of the most important benefits of Business Continuity Instructions and how they can act as a safety net against the unexpected.
1. Keeping the Lights On – The sudden absence of a business owner can cause the business to unravel quickly. Thought leadership, long-standing relationships, and even the ability to write checks and make final decisions could disappear overnight.
While it may be optimistic to think that someone would be able to figure it out, a business owner’s institutional knowledge is something that is incredibly hard to replace without a plan.
Business Continuity Instructions can help codify your institutional knowledge and position the business to survive if you could no longer run it unexpectedly.
That’s because Business Continuity Instructions provide employees and advisors with guidance on who should run the business when you cannot. It typically includes descriptions of new roles and guidance on backfilling roles in the owner’s absence.
It also provides information on elements of business ownership that may be taken for granted. Having someone with the ability to access bank accounts, credit lines, and information about vendor relationships is something that your business does every day but may not be able to do without you. Business Continuity Instructions can provide written guidance about how to access these things and keep them running as if you were still there.
2. Pursuing Your Financial Security Goal – An unexpected absence can stop your pursuit of your financial security goal in its tracks. Remember that the most important goal in planning for a successful future as a business owner is to position yourself for financial security when you inevitably leave the business.
This includes if you were to leave the business unexpectedly.
Business Continuity Instructions can leverage the knowledge that you may have about your financial security goal to offer solutions for pursuing it to the people who will be taking over your company in your absence.
So, whether you are completely severed from your ability to run the business due to an unexpected death or permanent incapacitation, or are taking extended time away from the business due to a long-term illness or political appointment for example, Business Continuity Instructions can provide a road map to those left behind that could help you achieve your financial security goals.
This is especially important for the people who rely on you and the business to maintain their lifestyle. Specifically, family members and people you take care of could benefit from Business Continuity Instructions. That’s because Business Continuity Instructions can provide strategies that allow you to continue pursuing or to achieve your financial security goal even if you can’t run the business.
3. Determining the Fate of Your Business – Business Continuity Instructions could be the difference between winding the business down in your absence and maintaining a business that survives and thrives even without you.
If an overabundance of responsibilities falls on your shoulders and you are no longer able to take on those responsibilities, it could have a cascading effect on whether your business lives or dies.
Let’s say that you are the sole owner of your business. If you were unable to run the business for an extended period of time, that could lead to downturns in revenue. This might make it challenging for your business to pay its bills or honor its contracts. This could require the business to liquidate simply to pay debts. And this, in turn, could have negative effects on your family’s well-being.
On the other hand, with Business Continuity Instructions, you may be able to provide strategies for how to operate the business in ways that still allow you and your family to achieve the goals that you had set when you founded or ran the business.
This can be especially helpful for business owners whose family members are not active in the business. When you have family members who are not active in the business who suddenly have business responsibilities foisted upon them because of your absence, it can have negative effects on both your family and your business.
However, the benefits also extend to business owners who have family members who are active in the business. If you were ever unable to run your business but your business has family members active within it, Business Continuity Instructions can help reduce or eliminate any acrimonious disagreements among family members about what to do with the business if you can no longer run it.
Develop Your Business Continuity Instructions
Business Continuity Instructions could give you a voice in your business’ future when you cannot use your voice itself. They are often the missing link between a successful plan for business ownership and a successful plan for a post-business life on your terms.
We strive to help business owners identify and prioritize their objectives with respect to their businesses, their employees, and their families. If you have questions on this topic, we can help with more information or a referral to another experienced professional.
About Altus Exit Strategies
David Jean is the Director of Altus Exit Strategies and a Principal at Albin, Randall & Bennett, where he is also the Practice Leader of the Succession Planning, Business Advisory, and Construction & Real Estate Services Teams. David works with business owners who want to improve their business’s value before they sell through the Seven-Step Exit Planning Preparation™ process. He has worked with companies from $5 million to $50 million in revenue across a range of industries.
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