By Gary Smith
You’ve probably heard about advisory boards. These boards include outside advisors who can help you plan and grow your company. There are two great benefits to these boards. They can push you to act and hold you accountable. They can also help you see that you’re going through the exact things every other owner goes through. You’re not alone or the first person to deal with these issues.
Have you heard about a business continuity board? Typically, when you search for “business continuity,” you will find a lot of information about disaster planning or other planning when something necessary for business operations is affected.
Business continuity involves the continued operation of the company when something unexpected happens to the owner before the owner’s exit. You may have completed questionnaires about your business continuity plan for insurance companies, bonding companies, customers, suppliers, or franchisors. You also may not have thought about a plan beyond providing what you needed for the box to get checked.
That’s not what this blog is about.
Business continuity for our purposes involves answering the following questions when something happens to the owner:
- Who’s in charge?
- Is the company going out of business?
- Do employees need to leave and find other jobs?
- Do customers need to leave and find other vendors?
- What exactly did the owner do for the company?
- Does anyone know how to do what the owner did?
- What happens next?
Priorities
With business continuity, there is an order of importance regarding what you do in the first few hours, days, and weeks.
- You want employees to feel secure.
- You want customers to feel secure.
- You want suppliers to feel secure.
- You want your family to feel secure.
- You want the company to continue to operate with as little disruption as possible.
Business continuity is about your emergency exit plan. The emergency could be death, disability, incapacity/incompetency, being lost at sea, losing your cell phone, running away, etc. This planning isn’t for the owner. It’s for everyone else, including the company.
Keep in mind that this planning is just for the company’s management. You still must decide who has ultimate ownership/control of the company and who gets the financial benefit of company ownership.
How do you do this type of planning?
People on the Board
The first part of the plan is determining who will be in charge. This could be one person or a group of people. Who is in charge will determine who needs to be included in the business continuity board. If several individuals are in charge, that group will be your board. If one person is in charge, that person and the people directly reporting to that person will be your board.
Why do you need a board instead of just one person? Watch the first episode (or at least the first few minutes) of Designated Survivor. It’s a little extreme, but it makes the point.
This group will be responsible for keeping the company going. They will reassure employees, customers, and vendors that the company is fine and, most importantly, a plan is in place. This group will also provide your family with information and guidance about the company.
Purposes of the Board
The board also has purposes beyond running the company after the emergency event.
First, it provides reassurance to employees about the company’s future. Even though this isn’t the exit plan that’s good for the owner, it shows that planning for the company is being done. It also shows employees what the future might look like. You will definitely want to let employees know it exists and what it is doing.
Second, if you think it’s a good idea, you could make the board’s existence and planning known to customers, suppliers, and anyone else with whom you think it enhances a business relationship. It might be an effective marketing tool that differentiates your company from its competitors.
Third, it provides comfort to your family knowing that they won’t have to run the company or otherwise try to fill your shoes completely. While your family members won’t be part of the board (unless they are also key employees), you will want to meet with them separately, so they know what the plan is and what to do.
Fourth, it’s a psychological incentive to the employees on the board. You are formally recognizing these people as the company’s leaders. You are training them to run the company, not just manage their part of the business. You are making them important to the company’s future, and they know it.
When used correctly, this board will help you determine whether you have the right people in place and strengthen your relationships with them. The experienced attorneys at Venn Law Group can help. We help our clients determine the best solution for themselves and their businesses by guiding and managing the process so that the owners can continue to focus on their day-to-day activities while moving through the transition. Contact us today.
In the next blog, we’ll cover details on the next steps for your business continuity board.
Gary W. Smith has over 20 years of experience providing legal counsel and innovative solutions to business owners and management teams. His areas of focus include mergers and acquisitions, succession and exit planning, securities and capital structures, business structures, and tax. He excels at navigating the legal complexities of diverse industries ranging from professional services and IT infrastructure to manufacturing and real estate.
Gary W. Smith has over 20 years of experience providing legal counsel and innovative solutions to business owners and management teams. His areas of focus include mergers and acquisitions, succession and exit planning, securities and capital structures, business structures, and tax. He excels at navigating the legal complexities of diverse industries ranging from professional services and IT infrastructure to manufacturing and real estate.