Business Continuity: Protecting Client Value
In our contemporary business world, unpredictability seems to be the only predictable element. Business owners, from fledgling startups to well-established enterprises, find themselves navigating an ever-changing landscape, teeming with unforeseen challenges and obstacles.
This fluid environment makes having a robust business continuity plan not only invaluable, but essential. These instructions are a blueprint for safeguarding the hard-earned legacy of business owners. So, why is business continuity planning a non-negotiable facet of a successful relationship with your client? Let’s explore why you should engage your clients in conversations about business continuity and how it relates to their financial security.
Beyond Immediate Concerns: The Long-Term Vision of Business Continuity
In a recent survey conducted by BEI, we found that only 26% of business owners have created a business continuity plan as a step towards their Exit Plans. However, 61% responded that they have determined what their financial needs are at the time of exit. This presents an opportunity for advisors to engage clients in a discussion of their long-term financial goals. Further, advisors can share how to protect those goals should something unforeseen happen to them in the short-term that would jeopardize their financial security and business stability.
It is here that the role of business continuity planning becomes paramount. It provides a solid foundation to begin the planning process, regardless of when the owner is planning to exit, or even if they have engaged you to do a full Exit Plan. This planning goes beyond immediate concerns, encouraging business owners to view the bigger picture, focusing on both the preservation and growth of their businesses and the protection of their wealth.
Safeguarding Legacy and Fostering Peace of Mind
At the core of business continuity planning lies the goal of protecting the business should an event happen in the lives of business owners that prevents them from continuing to work in the business. It not only offers a safeguard for the businesses they have painstakingly built, but also promises peace of mind, knowing that their loved ones and employees will have a pathway to navigate through uncertain times.
Business continuity plans and instructions encompass critical components such as initial contacts to be made, actionable steps to be taken in the aftermath of the owner’s sudden departure, and outlines for management responsibilities. This roadmap aims to prevent a vacuum of leadership and direction, providing clear guidelines to steer the business through potentially turbulent phases.
Bridging the Gap to a Secure Post-Business Life
We mentioned previously that a majority of owners have determined their post-exit financial needs. Interestingly, business owners often harbor a misconception regarding their financial outlook. There seems to be a common belief that expenditures will reduce once they step away from their business roles. However, the reality often paints a different picture, with many finding that life post-business demands financial planning akin to, if not exceeding, their current spending patterns. When this misconception is combined with the other assumption that business owners make regarding the value of their businesses, it’s a recipe for financial disaster.
Once owners have a plan started based on realistic financial expectations and business value, and know how they are going to work with advisors to bridge that gap, it’s imperative to start asking the “what if” questions.
What if 3 years into a 10 year plan, the owner suddenly becomes ill and can no longer work in the business? What if the business has two owners, and one dies unexpectedly and the buy-sell agreement doesn’t address this type of departure? Is there a plan in place to keep the business running profitably so that the owner’s family is taken care of financially when there is a sudden loss of income? As you can see, it becomes imperative for business owners, even those who are reluctant to exit in the near future, to combine business continuity planning with a realistic and forward-thinking financial strategy.
Creating a Resilient Business: The Role of Advisors in Business Continuity Planning
Advisors play an important role in helping business owners develop a plan that is both flexible and resilient, able to withstand the challenges that might lie ahead.
Creating business continuity instructions is a critical step in this journey. In an ideal scenario, an Exit Plan unfolds seamlessly, transitioning ownership smoothly at the planned juncture. However, real-life is rarely that straightforward, with unexpected eventualities like death, incapacitation, or disputes throwing a wrench in the works.
Business advisors equipped to help business owners foresee these potential hiccups and formulate strategies to mitigate them effectively can show immediate value to their clients, leading to more comprehensive planning engagements. These strategies encompass a set of instructions that serve as a guide for family members and other stakeholders, addressing both personal and business challenges that may arise due to the sudden absence of the business owner.
The Bottom Line: Envisioning a Protected Future
Irrespective of business transitions timelines, business continuity planning emerges as a tool of empowerment, offering stability and foresight amidst uncertainties. It’s a clarion call to business owners to rise above the immediate hurdles and carve out pathways that ensure the protection of their legacies, fostering a future where their businesses not only survive but thrive in the hands of those who follow in their footsteps. Are you prepared to assist owners with this level of planning? Schedule some time with us to view how BEI supports advisors with content and tools to attract, engage, and plan with owners on the topic of business continuity.
