Yes, bad things happen. They happen to everyone — and that includes business owners. They have accidents, get sick and even die. No one can predict the future or how events beyond an organization’s control may affect its ability to continue to operate. Unfortunately, when the unexpected strikes, there’s very little time to create and implement the right plan.
An unplanned situation involves numerous, powerful dynamics that require many people to work together to produce a positive outcome. Putting the right people and resources in place ahead of time is essential to mitigate negative consequences, and managing the situation properly and addressing the strain on stakeholders will allow for the maximum preservation of the business’s value.
Most business owners have a great deal of faith in their partners and staff, and they strongly believe that all would rise to the occasion. No matter how well deserved that faith may be, it still doesn’t answer the very granular logistical concerns that go with running a business. Which one of your staffers or partners would call your customers/clients and vendors, and what would they say? What’s more, are the appropriate authorizations in place for that person to transact business on your behalf? Who would call your bank, attorney and accountant — and what would they say?
The Day-After Plan
Answering these questions comprises the first part of what we have named the Day-After Plan. At Wipfli’s Business Transition Group, we consider it an essential part of organizing a business to succeed and prevail.
Having a plan to identify and address unknown scenarios that may affect the viability and sustainability of the business’s operations, corporate governance and client/customer management allows a business to prepare for events that could have a negative, and sometimes permanent, impact on the company and its enterprise value. Simply stated, a Day-After Plan is a blueprint for how to deal with unforeseen events.
Its purpose is to allow an organization to return to its daily operations as quickly as possible after an unforeseen event. The Plan protects resources, minimizes client/customer inconvenience and identifies key staff, assigning specific responsibilities in the context of recovering from an owner’s absence. The process of creating a Day-After Plan allows an organization to better understand its business, discover shortcomings and find ways to improve. Furthermore, your Day-After Plan demonstrates to employees that the organization protects their well-being while displaying a sense of corporate responsibility.
The Chain Reaction
The first part of creating a Day-After Plan is understanding how your typically organized, capable and pragmatic staff is likely to react if there actually is an emergency. They will be upset and possibly overwhelmed by emotion. As we all know, in times of high emotion it can be difficult to take action. Your mind gets cloudy and it’s hard to retain information. That’s why a list of instructions is so helpful. Such a list provides clarity, logic and reason in a time when those things will be sorely lacking. It will help employees know that you’ve prepared for such an eventuality and that the proper steps are known by those in charge and merely need to be executed according to plan.
The Strategic Issues
Now we’re ready to go beyond the first day and look at the bigger picture. This is where you have to ask yourself the hardest question: What would you want to happen to your business if you couldn’t run it, whether temporarily or permanently? And there’s a corollary to that question: If you needed or wanted to transfer ownership, how would you want that to happen? Do you even know what your equity in your business is worth?
Perhaps there is already someone at your company who would be both willing and able to step in and take over. If that person is a family member, review your plans within the context of your future estate: Will the rest of the family consider this fair? Will the inheriting family member resent the other members, who have not invested as much sweat equity? There may be complicated emotions to consider.
If that person is a partner or staffer, rather than a relative, your path may be clearer. Nevertheless, make sure that person is well acquainted with your family. Goodwill means a lot.
Clearly, in order for a Day-After Plan to be viable, you should have some documentation of your business plan and day-to-day operations. Having a recent valuation of your company is also helpful and should be updated every two to five years. By doing these things, you will provide the people who step into your shoes with a map for where the business is headed; it will also provide your family with a benchmark for what the equity in the business could be worth.
Ideally, the people in whom you’ve placed your trust will be willing and able to follow the plan. But even if they are not, the business plan and valuation will provide invaluable guidelines for new principals. What you don’t want is for a potential buyer to consider your firm “distressed.” This will harm the value your estate could reap from the business and will add to an already stressful time.
Get Started With Your Day-After Plan
A Day-After Plan is no substitute for a complete strategic plan for your business. But it is a good place to start. Getting out of the day-to-day and looking at the overall arc of your life allows you to think big. What do you really want your future to look like? You may find that, once you’ve looked at the Day-After, you feel freer to consider the positives in your future. Then it will be time to think about opening a view into a future full of possibilities.
Contact the Business Transition Group at Wipfli to learn more about Day-After Plans and how they can benefit your business.