What Is A Business Continuity Plan?

Today, I’m talking about
business continuity from the
standpoint of exiting your business and making sure that if you
exit your business in a way that you did it, intend to, that your business and your family and
your managers and leaders within your business know exactly what to do. Hi there. My name is Ashley Micciche, CEO and co owner of True North Retirement
Advisors where we specialize in retirement and exit planning
for business owners. All right, so let me just start off by saying now
some people might dismiss this video as being like, Oh, I have a buy sell
agreement. I’m good, I’m covered. Well, if you think that your buy sell agreement
is robust enough to cover every type of circumstance, in what will happen
if you exit under various scenarios, death, incapacity, etc. What
happens to your business? What happens not just to how the business
is transferred to other owners or other partners, but most buy sell agreements do not
address the family side of things and they’re not detailed enough to address
a variety of different unexpected exits that might occur. The key point here is that the business
continuity plan doesn’t replace the buy sell agreement, but it is
an importance supplement to the buy sell agreement that you
hopefully already have in place. So let me just talk about some key things
to kind of get you thinking about what exactly is included in a
business continuity plan. And I think by the end of
this you’ll be like, wow, I definitely don’t have that. Most business owners do not have
anything like this in place, but it is incredibly valuable, especially in the chaotic
days and weeks that after you might exit your business unexpectedly. So if you care about
protecting your family, which I know most of you watching this do, if you care about making sure
that your business can survive, that your employees are going to be
taken care of in those first few days, weeks and months, listen closely because we’re talking
about a lot of things and we’re going to bring it all together in one plan that
you keep handy at all times for those who need it. If something happens to you, one of the first things that a good
business continuity plan should address is who should tell your employees that you’ve
died or you’ve become incapacitated. And how should, so it’s important to designate
one person to do this, someone that hopefully they know. And do you want to tell them in person?
Do you want to tell them right away? Do you want to wait as long as possible
and wait for rumors to circulate about why you haven’t shown up
for work in the last week? So these are all important things to
figure out beforehand because if you think about just this one decision alone, you probably have an idea of how you
want your employees to be informed and by whom. But who your family
and business partners, they can’t read your mind. They
don’t know what your wishes are. So we have to put this in writing. We
have to give detailed instructions. And just this one item alone is super
important so that your employees feel safe and secure and knowing that you’ve taken
the steps to ensure that they’re still going to get their paycheck, there’s,
you know, things are going to continue. So that’s number one, how do we inform
our employees and who doesn’t? Okay. The second one is, should
customers or clients be informed? And again, similar to
the employees, by whom, how do you want that done? Maybe you only want to tell certain
people or clients or customers if they ask or do you want to like send a letter
to everybody saying, Hey, Joe died. Go find somebody else. So it’s very important to establish how
you want your customers and your clients to be communicated with and
by whom and how, et cetera. In an ideal scenario, how would you
want your business to be transferred? Should it be transferred
to a business partner? Another employee? If a family member, do you want it to be an inside transfer? Do you want it to be an outside
transfer? If it’s an outside transfer, the business continuity instructions
should include a list of businesses. Maybe or other other outfits, other potential buyers who may have
approached you seriously or who you’ve talked with seriously in the past
about selling your business too. If you think about it, this
is a great way because if, if something happens unexpectedly
and no one inside the, the company is there to
kind of take your place. If you can identify other third parties
and list those there so that they can be contacted in that situation, it can make for a lot smoother sale of
the business if your intention is to sell it to an outside third party. So if
you’re going to transfer your business, what is the desired minimum value
that you want your family to receive? Um, should something happen to you. So it and the exit planning process
that we go through with our clients, one of the first things we figure out is
what is that desired or what does that bare minimum amount that we need to get
for the value of the business in order to transition into retirement so that
we have the financial resources that we need for the rest of our life
or for the next phase of life. So you want to do something similar even
if the exit is unexpected and if you were to die or become disabled before
you complete that exit planning process, what is the desired minimum amount from
the business that you want your family to receive? It’s important to spell that out in the
business continuity instructions as well so that your family, like if your
business is worth $2 million, even if you exit unexpectedly, um, it prevents your grieving spouse from
accepting a hundred thousand dollar low ball offer. So it gives them some range as to
what they might expect or how they can negotiate, especially if that valuation
isn’t based on hopes and dreams, but actual real hard dollar numbers
that are accurate and up to date. The business continuity instructions, a good business continuity plan also will
address who should be responsible for what internally, who’s responsible, who’s going to take over running
the show at your company. Who do you want to be in charge of?
Finance, operations, administration. We have to designate people and these
people may already be in charge in that role, but it’s important
to reiterate that and say, this is who I want to be in charge of
financial related matters in my absence. Another thing that the business continuity
plan should address is what happens to the employee benefit packages?
What happens to health insurance? A 401k plan. Do you want like 401k plan? Do you want the 401k plan to
terminate? Do you this is a, um, not nearly as important in the days
and weeks and months after a unexpected exit, but it is important longterm to
address how you want those benefits, uh, handled. Especially, you may have some other unique bonuses
like I’ve talked about in other plans like our other videos like nonqualified
deferred compensation plans. You might have other retirement
plans, you might have, um, state bonus plans or other things. What do you want to have happen to those
plans? Should something happen to you? Very important consideration. This one is how do you want your family
income stream to your family to continue and how will that be funded? So do you want to ensure that your
family still has an income stream coming straight from the business or their life
insurance policies that are going to replace the income that you were
receiving from the business? What does that look like? What is it
that you want your family to receive? That of course is realistic
and how will that be funded? The last thing that the
business continuity plan
should address is what might happen to the value of your
business if you unexpectedly exit. So for most closely held
businesses where it’s just, especially with just one owner, uh, it’s extremely damaging to the value of
the business and what you can get for the business after the owner dies
or becomes disabled or is no longer, for whatever reason, no longer able
to continue running the business. So it’s important to address that
because it might require you to look at purchasing additional insurance policies
or coverage so that if something happens to you unexpectedly that your
family is still gonna be taken care of and the business value won’t drop. So thank
you so much for sticking with me today. My name is Ashley Micha, K and before you go please
like this video comment below. What did, what did you think of business continuity
plan was before you watch this video and how has your understanding of that
change? I’d love to hear your feedback. And then also if you subscribe
by clicking the button below, um, we put out new videos
every single week and, uh, all around exit and retirement planning
for business owners to help you on your path and your journey to a
financially secure retirement. Thanks again for watching
and I will see you next week. [inaudible].

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