Reasons why it is important to have business continuity planning
A continuity plan is one of the most important parts of business exit planning because it protects the business’ interests in the short and long term.
Fremont, California: Business continuity is perhaps a strategy used to manage the transfer of a business to a new owner when the previous owner leaves, dies or becomes incompetent. A continuity plan is one of the most important parts of business exit planning because it protects the business’ interests in the short and long term.
If a business is not prepared for continuity, the death of an owner can cause a chain reaction of events. Such a lack of focus can lead to the loss of financial resources and suppliers, important personnel and, eventually, loyal consumers. Here are the top concerns that can arise when homeowners don’t make a plan, along with strategies to mitigate them:
Loss of financial resources
Sellers can choose to stop providing services to the company, especially if the company fails to meet its obligations. In addition, banks, lenders, bonds and financial institutions with which companies do business may discontinue their contact with the company.
Key talent decline
Another issue that can wreak havoc on business continuity is the loss of key personnel. Whereas if the remaining owners lack their expertise or talents, the business may suffer as a sole proprietorship. Expertise, capabilities and relationships with customers, suppliers and employees can be difficult to replace, especially in the short term. Begin to prepare and train competent successor leadership to fill their shoes in solving this problem. Users should also start planning for the transfer as soon as possible, as training potential replacements can take years.
Absence of staff and customers
Employees will be unable to fulfill their obligations to customers if suppliers terminate their relationship with the business, which is especially true if the business is wholly owned. This could hasten an employee’s departure, taking with them vital skills and potentially customer relationships.
Businesses with a sole proprietor should be aware that there will be no continuity unless the sole proprietor takes the necessary steps to create a future owner. This step should be addressed as soon as possible, whether to train a successor or to create collective ownership. Even if the estate or trust owns the business, users will need to ensure its continuity, even if only for a short time if it is sold or transferred.