There may be a surprising silver lining to the Covid-19 crisis for some small businesses.
Nearly 60% of small business owners said there has been at least one positive thing to emerge from managing through the coronavirus pandemic that will be continued by their organization in the future, a new report has found.
Wilmington Trust’s upcoming Business Owners’ Outlook shows that for some entrepreneurs that may mean working remotely or having better communication with employees. For others, it could be creating or revising a plan for what would happen if another unexpected event hit their business.
The coronavirus pandemic has created many unknowns and highlights several questions that many small business owners need to answer: Who would run your business if you were sick or unable to work? How can you sell your company in the middle of this health and economic crisis?
Livelihood at risk
“You’re putting your livelihood, and often the people [who work] there, their largest or second largest asset, at risk by not thinking about all of the ‘what ifs’,” said Jill Johnson, co-founder and CEO of the Institute for Entrepreneurial Leadership, a non-profit organization in northern New Jersey that helps small business owners, specifically women and people of color, obtain access to professional advice, peer networks, and financial capital to develop and grow their enterprises.
“By planning for what’s next, they’re not only mitigating risk, but what that is doing instead is for their future,” Johnson said. “One that is much better positioned [for their business] to be able to be sold at the end of the day.”
Entrepreneur Adrienne Fudge has spent long days and nights over the past six months figuring out how she can secure food and containers from vendors so that her Maplewood, New Jersey-based business can continue to operate. The company, 40 Dreams Catering, cooks, packages and delivers meals to seniors and disabled adults in neighboring communities.
Fudge says she has had little time to plan ahead for what would happen to her business if she wasn’t around, and losing a loved one recently made her think more about her future and the future of her business.
“We don’t know what our health is going to be like in the future. No one thinks about it,” Fudge said. “With the passing of my father, things have been brought home very quickly. I’m realizing, not only do I need to put things in place for myself, I also need to for my employees because life is short.”
Fudge has been working with a financial advisor she met through one of the Institute for Entrepreneurial Leadership’s programs designed to provide of a network of experts to help entrepreneurs grow and scale their business and have more options for accessing capital.
Small business experts say having a succession or transition plan not only creates peace of mind for entrepreneurs, it also can make a small business particularly attractive to potential investors.
Fudge agrees it is a critical next step for her business.
“Do I need to have a plan? Yes, absolutely,” she said. “Am I working on it? Yes, absolutely.”
Yet, many small business owners never plan for who could own or manage their business if they can’t. A recent survey found that only 54% of business owners who have an ownership or management transition plan are “highly confident” that their business will be able to survive.
“There can be a lot of gaps even when a business owner thinks that they have a plan in place,” said Marguerite Weese, national director of family legacy strategies at Wilmington Trust, a division of M&T Bank.
Questions to ask
Here are four questions Weese says small business owners should answer to make certain their enterprise survives and thrives:
Is your plan transition plan documented somewhere?
Have you expressed your plan to other people, specifically those that are that are named in a plan?
Have you taken the time to prepare them?
Have you revisited your plan to make sure it’s still meets your current circumstances?
Fudge already has answers to some of those questions. She said she wants her sister to run her catering company if she unable do so, and she will bring her small team of five employees up to speed on her plans soon. She also has developed a network of fellow entrepreneurs in the senior care business who she thinks may potentially be interested in purchasing her company one day.
Fudge plans to review her goals with her financial advisor and make sure she puts her desires in writing.
“The better you plan,” she said. “The more you can prepare yourself for what might happen with the good and the bad.”
The post Here’s how a succession plan could actually save your small business appeared first on CNBC News and is written by Sharon Epperson
Original source: CNBC News