Assuming You Have One, Your Business Plan Is Worthless Unless You Have Addressed This One Threat:
If you have an updated annual business plan and a management system in place to monitor the progress against that plan, you are in the top 10% of all companies operating today. Even if like most owners, the plan is largely in your head, what is your succession plan? More specifically, what person in your company is viewed as critical to your company’s viability? What happens if that person dies right now?
In September 2004, on a bright sunny day in a fairly small southern town, a man who founded a business and grew it to more than $15 million in annual revenue was in his office following his normal routine. Then it happened. A sharp pain signaling a heart attack. 911 was called and in this town they actually answer the emergency line and the emergency squad was there shortly. He died within two hours.
He left the company to his wife. She is a very nice person, but she did not have the experience to manage a $15 million company with over 100 employees. Her life insurance proceeds were $1 million. During the next 10 months she infused most of that into the business. This included paying experts who told her they would help her make a lot of money. They wrote reports and made charts and graphs. One planned, while being paid to help her, on how he would take over the company.
She ended up selling what was left for almost no money and is ultimately left with very little. I worked with the buyer and about 50% of the original business was salvaged. All of the 35 people originally in the office are gone. The business has no resemblance to its former self. All of this could have been avoided with a sound contingency plan. The business developed by the founder was fairly sound and could have moved forward with the right leadership. The founder died suddenly at a relatively young age and most of his business died with him. His family who supported him during the business building years is left with nearly nothing.
Can this happen to you? Absolutely! Is this story uncommon? Absolutely not!! Two years ago I worked with another company assisting the surviving son in selling the business. His father had started and grew the business to more than $12 million in revenue. At the time I met the son, the business was doing about $6 million annually. The son had no interest in running the type of business his father started. In this instance the business was successfully sold.
Nearly every privately held company I have consulted with is at risk of being eliminated should the key person in the company no longer be able to work. They all agree a succession plan is needed. Have they done it? No!
In my last article, I addressed the issue of a contingency plan when the bird flu pandemic starts. This type of planning applies to a pandemic, terrorist attack or natural disaster and now I add the death of a key person to the list. Businesses generally ignore preparing contingency plans for these types of events. It is human nature to ignore the possibility of death, disease and destruction. If you are an owner, take action. This type of planning does not require a great deal of time, effort or money. However, this part of your business plan ultimately may be the most valuable. If you are a spouse of a business owner or an employee whose livelihood and retirement is dependent on the long term success of the company, you need to ask the questions:
- What is our plan if you die today?
- What is our plan when the bird flu pandemic starts spreading?
- What is our plan if a terrorist attack disrupts major traffic lanes or destroys commerce centers where our customers do business?
- Do we have adequate insurance coverage in the event of a catastrophe?
- What exactly is the coverage and how long will the business survive should we need to use that insurance?
- Do we have an effective backup and recovery process in place for our systems?
- Are all passwords for our systems and pc’s documented and kept in a safe place? Are they changed and updated on a regular basis?
- What do we do if our office burns down tonight?
Maybe you have additional questions to this list. You get the idea and yes a disaster can happen to you. You are now advised and you are accountable for getting this done. Your business, your family and employees are at risk without an effective plan in place. What are you going to do about it? When?
Be well and prosper,
Steve Pohlit is a CPA,MBA and has been the CFO of several major domestic and international companies. Today Steve is an expert business consultant focused on helping companies improve their business performance including growing profits, revenues and customers. For a FREE 6 week mini course where you will receive 10 easy to implement action steps guaranteed to increase business revenue in profits by at least 30% in the next 90 days, please visit www.StevePohlit.com All articles published by Steve unless specifically restricted may be freely published with this resource box in tact.