28 Aug Business Succession Planning: Disability Plans
In this post about business succession planning, we are going to talk about matters to consider in the event of a disability to the business owner.
I typically approach the topic of disability by asking whether the owner is going to be disabled for two months or less, or more than two months. The reason for the distinction is that two months or less is a relatively short period of time. It usually involves injuries or medical conditions that are referred to acute in the medical community. They are immediate and have a likely chance of a quick recovery to the point of being able to work.
A long-term disability may involve much more serious concerns, for example a cancer diagnosis, that may require a long-term care plan with months or even up to years of treatment. This may render the owner into a position where they can no longer successfully work in the business.
With short-term disabilities, the owner may still be able to maintain day-to-day control even if they are on bed rest. Remote decision making is also possible in long-term scenarios, but in the best interest in the health of the owner, it is important that they rest and recover without the extra stress of running a business. Most doctors will tell you that stress makes recovery longer and more difficult.
So what are some of the scenarios and plans that a business owner needs to consider?
Who and how will day-to-day operations be managed?
I recently heard a story of a business owner who was in a very serious car accident. The rest of the staff made an announcement that the owner was not well and thus was not readily available. In fact, the business owner was in a coma. It turns out that once that initial decision was made, there was enough standard operations procedures in place that the employees were able to continue to manage the business without any input from the owner. Of course, employees took on additional responsibilities. We often encourage our clients to write standard operating procedures that could come up at anytime. This way, people can follow an approved checklist, and in doing so fulfill the wishes of the owner in how things should be done.
How will parties communicate?
The next plan that needs to be discussed is a communication plan. The first channel of communication to take into consideration is between the business owner and the employees. Will the employees be providing daily or weekly updates? It doesn’t really matter the frequency, but rather that all understand the expectation of sending and/or receiving updates.
The next channel of communications is how the business will communicate with customers. This is particularly important in a service-based industry where customers tend to work with the business on a longer term. The sale of goods typically has a shorter relationship cycle.
Lastly, you really need to think about the communications between the management team (which could be your account, mentors, attorney, etc) and the business. The management team is available to offer counsel and support to your employees. Employees are often reluctant to speak to these outside consultants, since that is typically the owner’s responsibility. Thus, it is important for the management team to take initiative with proactive communication to the employees in the absence of the owner.
How will new customers be brought on?
When we think about business succession and disability, we often forget that the business owner is often primarily responsible for business development activities, such as client engagement, finding new customers, etc. The business needs a plan for maintaining that. It would be a shame for a business owner’s 3-4 month absence to result in a slowly failing business due to a lack of ongoing or future clients.
There may be other plans that the business owner should consider and planning alongside employees and their management team. This way, they can ensure that their business is operated in a way they think is best, and have the support of a team who can follow through successfully in their absence.
In our next discussion, we are going to talk about how a single owner manages a business in a disability scenario.