Business Continuity — Making Sure Your Business Continues if You Don't
A “Universal Truth”
A “Universal Truth” is that every business owner will someday exit their business, either voluntarily or involuntarily. During their lifetime or when they pass away.
The question is: “Will your business exit be on your terms or someone else’s?”
According to the Exit Planning Institute’s (EPI) State of Owner Readiness Survey, roughly 50% of owner exits are involuntary due to one of the 5 Ds: Death, Disability, Divorce, Distress, or Disagreement. And these stats were pre-COVID. The number may be higher now due to the forced liquidations and fatalities attributed to the pandemic.
The survey also revealed that 40% of surveyed owners have no contingency plans for illness, death, or forced exit. These numbers are startling! An unplanned exit can be devastating on so many fronts, from the owner themselves, to other stakeholders including family, employees, vendors, and community.
If we have learned anything from the past year, it is that we cannot predict the future, but we can prepare for it to the best of our ability.
The Risks of Not Planning for an Unplanned Exit
Business owners who do not have a back-up plan in place are setting the business and their family up for disaster. We have seen many cases where owners pass away or become seriously ill while they are still running the business, which can put their family, business, and employees at risk.
In a talk on Inc., Jessica Johnson-Cope, CEO and President of Johnson Security Bureau, discussed unexpectedly finding herself at the head of her family’s third-generation, 50-plus-year-old family business following her father’s sudden death. Her story illustrated the significant challenges of not having a sound business continuity plan in place.
“I think I spent three years dealing with lawyers,” she explained. Why?
Her father did not have a Will or Continuity Plan in place for the future of the business, should the unexpected occur. So, what was an already emotionally difficult time for the family, as they were dealing with his illness and death, was compounded by the fact that they now had to step in and run the family business without any real guidance.
The day following his funeral they had to do payroll and keep the business moving forward. As Ms. Johnson-Cope shared, they had a handful of large customers and 16 employees (and their families) who were depending on the continuity of the business.
No one expects to die. And certainly, few are ever ready to die. But most owners would choose to protect what they have spent their lifetime creating.
“You can’t take your business into the afterlife, so plan for this aspect of your business just as you would retirement,” Johnson-Cope said.
Even if you do not plan on transitioning or selling your business for years, having a back-up or continuity plan in place is critical. If nothing else, it offers peace of mind, knowing that your business, your future, and your family’s future are secure.
Your family harmony, legacy, and financial future depend on making proactive business decisions and planning for the unexpected exit.
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