Why even the most successful business leaders need a backup plan
"Failing to plan is planning to fail," as the saying goes. That couldn’t be truer for business leaders, who are responsible not only for their own security, but for many others’ too.
As a leader in business, the livelihoods and financial health of so many people are pinned to your own success or failure – family, employees, suppliers, partners and shareholders.
Hence having contingency plans isn’t just best practice for yourself; it’s the responsible thing to do for everyone depending on you.
Those plans should cover all the following significant events and how both you and the business will respond.
Premature death
We all hope to live a long, full life. Sadly, that doesn’t always eventuate.
How would your untimely demise affect everything you have worked for – building wealth for your family? Your professional legacy? Jobs for employees?
Backup plans help ensure everyone is looked after and that the transition is smooth should the worst happen. That includes having an up-to-date will, valid life insurance, nominated beneficiaries within your superannuation and other relevant structures, good records over your assets and liabilities, and a business continuity strategy.
Plus, if you own your business, consider whether any partners can afford to buy out your share or if your children have the necessary skills to keep it going.
Illness or incapacity
Again, we all hope for the best, but it’s still good to plan for the worst. Illness (such as cancer or a heart attack) or incapacity (perhaps from an injury or stroke) can severely inhibit our ability to earn a living, while simultaneously ballooning our healthcare costs.
How are the bills paid if you are unable to work? Could you and the business carry on if your absence was only temporary? What if your sudden exit was permanent? Examine your personal insurance coverage, financial obligations as well as the business decision-making process.
(NB: Prevention is better than cure. When did you last see your doctor for a check-up?)
Job loss
Redundancy. Forced resignation. Closure or collapse. All are part and parcel of the modern business world.
Your contingency plans – or lack thereof – can severely impact how quickly you find new employment, any financial losses you accrue, and your physical and mental health.
Ideally, include an emergency cash fund to tie you over, an up-to-date contacts book, plans for early retirement should you be unable to find new work, and a visit to your doctor.
Market shift
Cash flow problems, geopolitical upheaval, supply constraints, technology advancements or new competitors can all impact your operations and company value.
Even a business name can become a liability – just look at the string of companies recently rebranding to shake off racist wording or symbols. No business, regardless of size, is immune to market shifts, as demonstrated by once multinational giants Kodak and Blockbuster Video.
Forward-thinking businesses don’t react to change, they drive it – disrupting from within and creating market shifts as new growth opportunities.
Disaster
While we can’t determine when disaster will strike, we can take ownership over how we respond to it.
Protecting people is paramount, followed by protecting property. Where are your safe spaces? How are they accessed?
Next, look at how losses can be minimised – insurances, application procedures for government disaster assistance, and whether emergency pauses on taxes or loan repayments would be necessary.
Finally, consider how to minimise lost operability – remote working options, offsite digital backups, power generators, secondary customer-facing sites. Anything to keep revenue coming in.
Be prepared
As Greek philosopher Heraclitus once said, "the only constant in life is change."
Having a backup plan – preferably not one cobbled together last minute – can almost single-handedly decide whether the next change you and your business face is for the better or the worse.
Helen Baker is a licensed Australian financial adviser and author of On Your Own Two Feet: Steady Steps to Women’s Financial Independence and On Your Own Two Feet Divorce: Your Survive and Thrive Financial Guide.