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Ep #070: Why Your Business Needs a Strong Continuity Plan Thumbnail

Ep #070: Why Your Business Needs a Strong Continuity Plan

In this episode, I discuss the significance of the Business Continuity Plan document, exploring its role in protecting your business legacy during unexpected crises. 

Learn how this document can secure your business legacy, what is included in the document, and why every successful business owner should create one.

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Introduction

"Hey everybody today we are talking about the importance of having a business continuity plan. I will discuss what this is, why every business owner should have one, and what should be included in the business continuity plan document, so here we go... "

What is a Business Continuity Plan?

"First a business continuity plan is a document that explains what to do and what procedures to follow in an emergency. In many cases, this type of emergency is when the owner or one of the owners passes away or becomes incapacitated. Now I just did an episode on life insurance and disability insurance which are both very important but they don’t address or protect certain things, like your business from losing customers when you can’t fulfill orders... or protect the reputation of your business when things start falling through the cracks.  

So having a strong business continuity plan can reduce risks during a crisis, and helps make sure you can stay in business by detailing how to respond during and after an unexpected incident. 

Ok so let’s go over what’s in this document."

What is included in a business continuity plan?

"First is addressing management and assigning responsibilities so that in the event of a death or incapacity, the following people listed in the document are to be given responsibility to continue and supervise these activities.... such as someone in charge of Business Operations, someone in charge of making the Financial Decisions, and someone in charge of Internal Administration. Other immediate management concerns to consider and make sure you have documented can include specifying who else can sign the checks now or who should become president. 

It's really important to have this completed and make sure the people you list in this section are aware and willing to take on that responsibility because if a crisis does happen, ensuring a smooth transition to keep the business afloat and thriving will be essential.  

The second section of the document talks about what the owner's wishes are for the business if they were to pass away or if total incapacity lasts 180 days or longer. Now this should match and have similar wishes in line with your buy-sell agreement documents, but this section specifies if you want the business to be sold to an outside third party and who to talk to to get that done. Or if the owner would like to sell to employees, who would that be? If they wanted the business to be transferred to family members, who would that include, or maybe the owner would just like the business to be liquidated, that can be listed in this section as well.  

An estimated value of the business would also be specified in this section in addition to whether there is a Written Sale or Transfer Plan in place or not.  

Section three would include the business owners’ advisory team or professional advisors they were working with. So a CPA, attorney, Certified Financial Planner, Life insurance agent, etc. All of their contact information would be listed here."

Common Questions to Address Business Continuity Planning Challenges

"Section 4 is a list of questions that address common challenges that arise and how best to handle them so I’ll read off some of these questions and hopefully they’ll give you some ideas of how to think through them and prepare for yourself. So here are some of the questions... 

Are any key employees a flight risk? If so, who, and how to retain them? Will any loans or credit lines be called or frozen? If so, what’s the best way to handle it? Are there any problems with receivables? If so, how should we handle it? Will Family income continue at the same level? What needs to happen to document this? Will the business value drop and if so, how much and how best to handle it? 

And finally, the last section would be the signatures and maybe a section for a witness to sign as well. But that’s essentially what’s in a Business Continuity Plan document. Of course, you can add more detail depending on the size and complexity of your business but at the end of the day having something in place that is documented, and really important here... the owners or your team know that the document exists and how to find it... will be critical to protecting the continuation and legacy of your business."