For many entrepreneurs, their business depends on their daily routine involvement in the business. Often the entrepreneur business owner is responsible for the lion’s share of the firm’s business or profits, through his invention, rainmaking skills or sheer hard work. But what happens if an unexpected event or emergency takes you away from your job. And what if that emergency involves your death or disability? Do you have a plan in place?

Creating a Contingency Plan

The more aspects of your business you can set up contingency plans for, the better off you’ll be in the event of an emergency. If a temporary disability will set you back, it may be possible to get some of your key employees or trusted advisors to cover your firm’s business activities and operations. You can also get disability insurance policies to cover income replacement needs in your absence.

Experts agree, it’s difficult to create an “action plan” in the middle of a crisis. As many learned in the wake of the natural disasters that hit various parts of the country, you need a plan for dealing with data, records, alternate suppliers and other items in the event there is a fire, flood, earthquake, etc. The plan you create can deal with all aspects of a crisis situation, including the sudden absence of a business owner.

Types of Contingencies to Consider

The contingency plan you create should be multi-faceted. It should cover everything from who will run your business, to insuring your systems and records are sufficiently backed up in the case of a natural disaster. Even if you are the firm’s largest rainmaker and temporarily or permanently out of the picture, it is critical to have a plan in place to prevent the value of your business from eroding. Even if you never return, you want to preserve the value of your business for your heirs or for resale.

The more direct control you now have over various tasks, the more thought you need to give to parsing out your role to those in your organization, or even outside advisors (attorneys, accountant, trusted friend) who you trust to do the right thing. We recommend a three tier approach for formulating your contingency plan, depending on the nature of the issue which causes it to be implemented:

• Short term disability or some emergency event that calls you away from your business for a short period of time.
• Death or permanent disability that causes the owner to no longer be in charge of the business operations.
• Emergency created by fire or other natural disaster that interrupts business operations.

Factors to Include in Your Plan

While there is no one size fits all when it comes to a contingency plan, the scenario in many closely-held businesses is the same. If the owner is gone, the continued viability of the business is in jeopardy. And in some cases, there may be no way getting around it, but in others, even a short term plan may be implemented so that the business can be sold and at least the owner’s family or heirs can reap some benefit from the good will, client contacts etc.

To create a plan for your business consider the following:

Management

• Who will lead the business in your absence?
• Is there a person who is trained or “at the ready” to step into your shoes on an emergency basis? If not, give some thought to bringing someone up in the ranks to fill this role.
• Have you created documentation to insure the smooth flow of your business? Consult with your attorney about the efficacy of a durable power of appointment or corporate documents which appoint an interim successor?
• Does anyone in your operation know the key customers or business contacts? Make sure a list of these people is maintained in the same place as your documentation for contingency plans.

Operations

• Is anyone on your staff familiar with the bird’s eye view of your operations in the way that you are?
• How can work that you handle now, be done in your absence? Is there anyone who can step in on an interim basis to insure production and in-house functions of your operations run smoothly?
• Do you have a back-up for sales, marketing, and even banking functions? Make sure to designate someone (again a trusted advisor) to fill in if the need arises.
• Is there a back up plan for handling the company’s payroll, payables, taxes and other mandatory payments to creditors, etc.?
• Are your records, or back-up copies stored off site in a safe facility in the event a natural disaster strikes your business premises?

In a closely held business, many aspects of routine life will change if a disaster or emergency strikes. The key to get your business up and running quickly, or in a better position for sale, is to have plans in place that consider the items addressed above. Just like the scouting motto, “Be Prepared” is critical when it comes to contingency planning.