I just came back from a two-week vacation in Kenya. I was out of contact, exposed to wild animals, faced COVID and was flying half way around the world. This poses a risk to my business. What happens if I got sick or had an accident? Emotions run high during this time and a written carefully thought-out plan will help keep customers, employees and vendors and maintain the value of the business. It is estimated that 25% to 40% of businesses who experience an emergency never recover. I have an emergency succession plan to address just this issue. My plan is intended to reduce the stress and turmoil until a permanent solution can be implemented.
Consider these steps when drafting your plan:
- Identify a person to assume the leadership functions for a limited period of time. Identify the team that they may need to consult with to make decisions.
- Make a list of contacts, with contact information, in case of emergency. Names, addresses, e-mails and phone numbers of family members, staff, vendors, customers, lawyer, accountant, etc. Determine how much information you want share.
- Think about what decisions might have to be made or what critical functions have to be completed. Ensure the alternate person has the legal rights to make those decisions. Does the person need a durable Power of Attorney – financial? Or is the person currently authorized to sign checks? Ability to sign legal documents in regard to the business such as sale document, realtor contract? Identify who you want to be involved in those decisions.
- Determine if there may be any legal commitments that must be fulfilled, such as legal contracts with customers, vendors or your landlord.
- What do you want to have happen to the business in the case of an emergency? How long do you want the alternative person to hold the business? Do you want to sell the business? If so to whom? Can you discuss value? Or do you want to close the business?
- Gather the information needed to fulfill your plan. Such as a copy of the emergency succession plan, owner agreements, power of attorney for financial reasons, list of potential buyers, family members involved in the business, wishes on whom to gift the business to, passwords, etc.
- Is there an insurance policy in place to replace this key employee or fund the business until it is sold? Is the business adequately insured to cover this risk?
- Will the alternate person get paid for implementing the emergency business plan? If so how will they get paid? Part of the insurance proceeds, part of the sale of the business?
- Review the plan with your management team and key advisors.
- Place a copy of the plan with your will or trust, along with your attorney, your personal executor, anyone you want involved in the process and absolutely with the person who will lead the process.
- Review your plan annually and update.
If you need assistance in drafting or reviewing this plan, please contact our office. We will be happy to keep a copy in our files for you, as well as discuss it with you to enhance the effectiveness.