Develop a Contingency Plan – Ensure That Your Business Can Go On Without You

Have you developed a contingency plan for your business in case you die or become disabled? This is critically important. How many families and incomes would be affected if something happened to you tomorrow? How would your business function without you? Is there a written and realistic plan in place so that your management team and family could keep the business prospering?

A business contingency plan is a risk management strategy that should be part of every business plan. A contingency plan helps you and your colleagues prepare for and respond to an emergency situation. Premature death and the statistically more likely premature disability can have a tremendously negative impact on the business and the financial well-being of you and your family. In a privately held business, the value of the business often represents a significant portion of the family’s wealth, which can make the risks of not having a contingency plan even greater.

It stands to reason that we believe that every business owner, regardless of his or her age, needs a contingency plan. Doing this analysis, determining how the business will continue without you, and securing the necessary insurance will enable you to avoid the financial disaster that these life events can cause.

A contingency plan should not be confused with an estate plan or an owner’s will. All of these need to be in place for both the continuity of the business and to protect the family’s financial future.

At a minimum, a contingency plan should:

• Detail the owner’s goals and wishes for the future of the business.


• Identify who should manage the business in the owner’s absence and if necessary, include a development plan to prepare the successor for this responsibility over time.


• Include important business information, such as the names of the owner’s trusted advisors, including accountant, attorney, financial advisor, insurance agent, banker, business consultant, etc. and their contact information.


• Detail other key, confidential information and assets including bank accounts, safety deposit boxes, insurance, wills, etc. and passwords to access your accounts.


• Reference an executed shareholder or “buy-sell agreement” if there is more than one owner.


• Who can access liquid assets in the event of an emergency.


• All of the details for life insurance and disability policies so benefits may be claimed.

Owners who do not have a contingency or succession plan run the risk that their business will not be able to continue if they become incapacitated. This places them, their business, and everyone dependent on the business for their livelihood in great peril.

In addition, buyers are interested in acquiring businesses that are transferable with sustainable profits. A solid management team and CEO successor are critical components of a transferable business but are not usually present in closely held businesses. Developing a contingency plan, strong management team and CEO successor to be sure your business can operate without you will not only protect you in the event that something happens to you but it will improve your company value if you decide to sell.

Develop a Contingency Plan – Ensure That Your Business Can Go On Without You