Is Your Business Prepared for the Unexpected?

Based on insights from the ‘Exit Like a Boss Podcast – 21-Step Challenge‘, this blog covers Step 5 – Unplanned Events.

Addressing a crucial but often overlooked topic, we discuss the unexpected occurrences that can severely impact your business’s stability and, by extension, your life. What if unforeseen circumstances like a major illness or an accident suddenly strike? How would your business fare in the face of a natural disaster? Preparing for these unforeseen events is essential to safeguard both your business and the well-being of your family.

Safeguarding Your Established Value

Now that we’ve evaluated the value and potential of our business through a thorough fact-finding mission and a comprehensive Business Insights Report, it’s vital to ensure that this value is protected. Unplanned events are an unfortunate reality for many business owners, ranging from minor inconveniences to major disruptions. Hence, we must brace ourselves for what might come our way.

Confronting the reality of unplanned events can be daunting, but with effective planning, their impact can be minimized. As a business owner, your absence due to an unexpected event like a serious illness or accident can have a far-reaching impact. You likely play a key role in the company, being a shareholder, director, and probably an essential employee. Consequently, your absence not only affects the business but also has a significant financial impact on your family.

A Better Way: Buy-Sell Agreements and Insurance

To mitigate the repercussions of such events, many business owners opt for a buy-sell agreement. This legal document transfers the ownership of your shares to other shareholders while ensuring fair compensation for your family or estate. While the legal aspect might be relatively straightforward, funding this arrangement is the real challenge.

Insurance proves to be a viable solution to fund the buy-sell agreement. By insuring your life, you can ensure that your family receives the value of your shares in the event of an unplanned tragedy. This approach provides a structured and stress-free resolution during a challenging time, minimizing disruption not just for your family but also for the business.

The Employee Aspect: Key Person Insurance

Furthermore, if you are a crucial part of the business, like the CEO or a major revenue generator, your absence can also impact the business. Key person insurance steps in to provide financial support to the business, aiding in finding a replacement and mitigating the downturn in sales due to the disruption caused.

Unplanned events are precisely that – unplanned. However, this lack of predictability should not deter you from preparing for the potential fallout. Assess the value of your business and contemplate the possible unplanned events that could occur. If your business heavily relies on you, it’s imperative to take action and create a strategy to minimize the risks associated with such events.

Your Action Plan

The key takeaway from this discussion is to take proactive steps to secure the future of your business. Seek guidance from professionals in legal matters, financial planning, and insurance to ensure you have the necessary strategies and documentation in place to mitigate these risks. Safeguarding the value of your business on the path to a successful future is a crucial goal.

Prepare for the unexpected, plan for the future, and ensure that your business continues to thrive regardless of the challenges that come your way.

This article was originally published on capitaliz.com.

Dr Craig West

Founder & Chairman | Succession Plus

Dr Craig West is a strategic accountant who has over 20 years of experience advising business owners.

With a background as an accountant in practice and two master’s degrees, Craig formed a strong view that the majority of business owners (and often their advisers) were unprepared and unaware of the steps required to prepare for exit. He then designed and documented a unique 21-Step Business Succession and Exit Planning process to assist owners and their advisers in navigating this process.

Craig now acts as a strategic business and financial mentor for mid-market business owners. Craig has written four critically acclaimed books educating business owners on employee incentives, succession planning, asset protection, and exit strategies. Additionally, he has completed doctoral research on Employee Share Ownership Plans (ESOPs) for succession.

Craig is a Member of the Forbes Business Council where he leverages his extensive experience to contribute valuable insights on helping business leaders navigate the complexities of growing and exiting their businesses.

In April 2024, the Exit Planning Institute admitted Craig to the International Exit Planning Circle of Excellence.