When you’re a business owner, you should be prepared for any number of situations and you should always have contingency plans in place. Sometimes business owners might push off this kind of planning because it’s uncomfortable or they think it’ something they won’t have to face.
While you may never face worst-case-scenarios, it can make your business stronger if you’re well-prepared anyway.
One example of a situation to plan for if you run a business is what happens if you’re incapacitated temporarily, or for the long-term.
There are any number of reasons you might be incapacitated. As most Orlando car accident lawyers will tell you, people often face long-term injuries and rehabilitation after a vehicle accident, for example.
A car accident could mean that you’re hospitalized and perhaps in a medically induced coma for a period of time. There will need to be an understanding on the part of not only your loved ones but also your business partners or employees as to what should happen in your business during this time.
Another example that could lead to your incapacitation might be an illness.
There are legal and physical examples of incapacitation.
There are varying legal standards based on the state where you live too.
It’s so important to be proactive with your incapacity plan for your business.
What to Know In General
In general, if you are incapacitated, whether you’re a business owner or not, there are things that you can have in place that will make it easier for your family and can protect you and your heirs.
Terms to know include:
- Durable power of attorney: A durable power of attorney lets you assign certain medical and financial powers to specific people, and it remains valid if you are incapacitated.
- Guardianship: If in a certain case, someone is named as a guardian to you during your incapacitation, then it would void power of attorney. If you don’t have a power of attorney or living trust, then your family members can apply for guardianship of you. If someone becomes your guardian, they can then make decisions relating to your medical care and finances.
- Living will: A living will is something that’s important for everyone to have in place, whether they own a business or not. A living will lets your family know what can and can’t be done if you are determined incapacitated. This might include directives relating to medical care—for example, a living will might include a Do Not Resuscitate order or the conditions under which you’d like to be kept alive versus not.
- Revocable living trust: If you aren’t able to manage your assets and property, you can assign someone to do it for you. A revocable living trust allows you to stay in control of the assets in the trust, and you can change the terms anytime.
As far as insurance, if you own a business, you might want to purchase additional insurance like a disability policy with your spouse and children named as your beneficiaries. This will help your family avoid potential financial issues during the buyout of a buy-sell agreement.
If Your Business Has Other Owners
If you’re in business with other people, you should have a buy-sell agreement. This will protect you if another owner is incapacitated as well.
You need a buy-sell agreement to create a plan for an owner’s incapacitation or death.
The terms or provisions that are outlined in a buy-sell agreement can include a determination for how a business sale price is determined, and how the determination of an owner’s interest is made.
A buy-sell agreement may also outline if there are certain people who can’t participate in the business and whether the other owners will have the option to buy the interest of the incapacitated or deceased owner.
Create a Business That Can Operate Without You
There are a lot of reasons to set a goal for yourself to build a business that can operate without you, aside from planning for potential incapacitation. When you have a fully functional business, even if you aren’t there every day, it gives you more freedom.
You can enjoy time away, and your business is still earning money and moving along as normal.
This can all go back to literature and philosophies like what is espoused in The Four-Hour Work Week by Tim Ferriss.
The idea behind The Four-Hour Work Week is that you scale back how much you work to the point that you can live a life rich in experiences.
Some of the ways you can build a business that operates without you, whether it’s an emergency situation or because you’d like to spend your time doing other things include:
- Create standard processes. You want processes that can be replicated time and time again and will reduce the likelihood of issues like human error. Processes are a framework that allows your business to function no matter what else is happening.
- Empower your employees. Your employees should feel empowered and confident to make good decisions without consulting with you about all of them. You need to move away from being a micromanager if you want your employees to be able to stand on their own as problem solvers.
- Use technology as much as possible—this is a big part of how you implement redundancies. When you use technology, not only does it integrate technology, but it allows people in your organization to work remotely more often, including you.
Preparing for the Unexpected
Overall as a business owner, it’s important to work toward agility in your organization, but also to have finite plans in place for the unexpected.
You have to think about all possible situations that could occur in the future, and have plans for each of them.
Then, once you have these plans in place, it can provide you and your family with peace of mind. That way, you can work on strategies that will allow you to grow your business.
The better contingency plans you have in place all the way around, the stronger your business is going to be.