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Are you a business owner?  Would you say your business and ability to generate an income is your biggest asset? Do you have a contingency plan in place? If not, you ought to consider having one in place. A contingency plan could be a very important element of a financial security plan to help a business owner’s overall financial success.Business owners go through different stages in their business:

  • Growth – the owner is focused on driving the revenue, delegating work to lower management
  • Maturity – stabilizing revenue, increasing attention to expense management and retaining employees
  • Decline – increased competition, changes in the playing field and decrease in demand for product

Business owners are often so consumed with their business, that matters such as having a contingency plan get moved to the back burner.

A contingency plan is vital at every stage of the business, regardless of the business owner’s age. A business owner’s absence can have a major impact on the business.

There are many uncontrollable situations that can divert the business owner’s attention and most occur without notice such as:

  • An accident at work or personally (for instance, a car accident)
  • A prolonged sickness
  • Marital or relationship breakdown
  • Illness or demise of a family member
  • Premature demise of the business owner

This why a contingency planning can and should be dealt with at every stage of the business. Overall , contingency planning should involve  some or all of the following strategies:

  • Communication: Business owners need a detailed communication strategy (process) to address the needs of key suppliers, clients and employees
  • Life and/or critical illness insurance: Insurance coverage is a valuable resource to reimburse for expenses incurred due to the loss of a key executive (business owner), to provide cash for debt repayment, to avoid credit recall and to fund the buy-sell of shares
  • A shareholder’s agreement: When there is more than one shareholder there should be an agreement in place that states what happens in the event of a contingency need
  • Support team: Business owners need a strong management team that understands their roles in the event of a contingency need

If you own a business or plan to start one, make sure you have a contingency plan in place and that you revisit your plan at every stage of your business and with any life changes.