Managing absence

guest commentary by David Potts

You’re a small business owner. Now imagine what would happen if you decided not to show up for work tomorrow and you didn’t return for a year. What would have happened to your business? Would it still exist?

Every company needs a succession plan. A succession plan is simply an instruction manual that outlines what is to happen if the business is suddenly deprived of its leadership.

For many if not most small businesses, if something happened to the owner or key employee, the business would have to close. Years of hard work and personal net worth would evaporate. Your family would think harsh thoughts about you for leaving a mess for them to clean up. Your employees and customers would be left in a lurch. If your sudden departure was due to your death, nobody would have time to attend your funeral because they would be scrambling to get out of the difficult situation you left them because you failed to plan for the company to continue.

If you are a small business owner and as you read this you recognize the need for a succession plan, let me point you in the right direction. As you begin to think about your succession plan, ask yourself “What would happen to my key customers if I could not come to work tomorrow?”

If you were not expected to return in the near future would your competition be able to make a phone call and convert them to their customer? If you built your business from the floor up, the relationship between your business and its key customers is probably vested in you. What would happen if you were gone?

What would happen to your key employees? Would they know how or even have the authority to make the critical decisions required to keep your business operating effectively? How long would it be until they found new employment, maybe taking your best customers with them to their new employer?

What would your banker do? Foreclose?

For a small business a succession plan begins with building an organization not dependent on the ego and personality of the owner. It is about putting the right people in the right places within your business with documented systems and processes in place to provide proprietary products and services of high value to your customers. It’s what a small business should be doing continually, every day of its existence. It is about building a business that is self-sustaining because you created a culture where employees are mentored and trained in the key processes that make your business successful. It is about building your business so that when you are ready to retire you have a business vested with goodwill that can be sold for top dollar. It’s about having a legacy that can be passed down to the next generation. It’s about preserving the value of a lifetime’s work. What it is not about is you and you being important (however disappointing this realization might be.)

As you build your business into a self-sustaining and stronger organization, prepare written instructions with the critical steps that need to be taken in the event of your absence from the business, an absence that will eventually come. Communicate these instructions to your spouse, your successor, and your key employees so they aren’t left in limbo when the event of your absence occurs.

The most important decision you will make is the choice of your successor. Who will that be? Most small businesses don’t have a large employee base or management team to select a successor. If you want your business to continue successfully in your absence a successor is required. You might be able to develop and mentor an existing employee or family member to be your successor. If this isn’t a possibility, you should consider hiring an experienced manager.

You know you have been successful in selecting a successor when you leave for an extended vacation and come back and the business is doing better than when you were there. You might find that if you get out of the way you really do have a great business worth a lot of money. You were just in the way.

In my last commentary I offended at least one attorney by inferring that a small business without a succession plan would be like leaving the business to its attorneys. In other words, I was making the point that the expense of settling the affairs of a business dependent upon its owner that failed to plan for his absence could be costly.

Let me make amends by saying that to complete a succession plan, you really do need to consult an attorney. A small business suddenly deprived of its owner will have many legal issues to resolve. The advice of a competent attorney in advance is a worthy investment that will save you money. You should also consider consulting your accountant, your banker, and your insurance agent. Oh and don’t forget your spouse.

Live long and prosper.

A side note: Congratulations to Boyd Metals on its 20th anniversary in business. Boyd Metals, a steel service center located at 600 S. Seventh St., began life in Fort Smith in 1991 and now has locations in Fort Smith, Joplin, Oklahoma City, and Little Rock. Boyd Metals is the model for building a business with the right people in the right positions committed to delivering high value products and services to its customers. Congratulations Chester Koprovic, Tom Kennon, Ron Tabor and crew.

About Potts
David Potts is a certified public accountant also accredited in business valuation. Owner of Potts & Company, Certified Public Accountants for more than 25 years, his practice focuses on small and medium size businesses and their owners in the areas of taxation, accounting and bookkeeping, business valuation and business advisory services. He is a Fort Smith native and a graduate of the University of Arkansas. You can follow more of his thoughts at ThePottsReport.com. Although every effort is made to provide you accurate and timely tax information, it is general in nature and not specific to your facts and circumstances. Consult a qualified tax professional to discuss your particular case.

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