Everyone is familiar with the Christmas song, The 12 Days of Christmas.  Without going into every verse of the song, the carol works forward with the first day of Christmas being a partridge in a pear tree, the second day of Christmas two turtle doves and so on.  The song is full of optimism and hope that the giver and receivers of the gifts will be thankful for life, the opportunity to share and hope for the future.

From researching the origins of the song, I came across something interesting.   One of the articles I read suggests the 12 days of Christmas is not about the 12 days prior to Christmas but in fact, the 12 days from Christmas until the beginning of Epiphany which begins on January 06.  When I thought further about this, it naturally combined with another favorite thing we do during the Holiday Season and that is to make New Year’s Resolutions.

New Year’s Resolutions are a powerful opportunity as they allow us to do three separate things.  First, look back at our experiences of the last year and decide if it’s been a good year and what we could have done differently.  Because it puts us in the mood, we also tend to go back and look at more than just the last year but initially the last couple of years and decide whether or not it has been good.  Once we start doing that, we obviously look back at our life and decide what we like and what we wish we could do differently.

Our next reflection tends to move to the present where we look at our life and what we now have.  We reflect on our family and friends and how important they are to us.  We also look at whatever means we use to sustain ourselves and put a roof over our heads, the food on the table, the clothes we wear and the myriad of other things that allow us to live our life.

This then brings us to the final reflection and probably the most exciting and powerful opportunity of all and that is to look ahead and decide what changes we’d like to make to build and enhance our life and our immediate loved ones.  This reflection, for obvious reasons, takes us to both our job and what we are currently doing or, if we own a business, how that business is performing.  Regardless of whether we have or do not have a job or own a business, it is the time to ask some questions.  These questions include whether or not what I am doing is worthwhile and fulfilling, whether it produces the income I need to live the life that I want, what changes I want to make to achieve the personal, financial and emotional goals I’ve set for myself.

So the point of this article is a couple of things.  As you embrace the Holiday Season, enjoy it as it is a special time and I wish you nothing but peace and goodwill.  If your time allows, sit down and meaningfully decide on your New Year’s resolutions.    If your New Year’s resolutions are likely to include either buying or selling a business you may want to consider a thoughtful and logical approach.

If selling your business is an option you are considering, this link will provide a simple summary of the steps.  http://www.rogersonbusinessservices.com/docs/TheManyStepsToSellingABusiness.pdf

If you would like more information then this link will allow you to buy and download a copy of my book Successfully Sell Your Business.  http://www.rogersonbusinessservices.com/book-successfully-sell-your-business

If buying a business is an option you are considering, this link will provide a simple summary of the steps.  http://www.rogersonbusinessservices.com/docs/TheManyStepsToBuyingABusiness.pdf

If you would like more information then this link will allow you to buy and download a copy of my book Successfully Buy Your Business.  http://www.rogersonbusinessservices.com/book-successfully-buy-your-business

Owning, running, buying or selling a business is a major step for all entrepreneurs.  It comes with obvious financial risk which everyone understands and is one of the key focus and responsibilities all business owners.  It also prevents many would-be-entrepreneurs from starting their journey to own and operate their own business.  However, an element not all business owners understand or acknowledge is that the business ownership comes with many emotional risks that play just as an important role as the money itself.

Emotional risks constantly challenge all business owners.  The obvious one is success or failure.  For most entrepreneurs, once they come to terms with the financial risk, they must come to terms with the fact there is a possibility the business will fail.  The fear of failure links with the real concern about what to say to family and friends.

Another emotional risk which is part of an entrepreneur’s journey is handling the ups and downs which inevitably lead to burn out.  Every entrepreneur hopes there are more ups than downs and that the ups are greater and longer than the downs.  This means not only emotionally handling these situations but more importantly, building and using different tools and resources so they are available when needed.

A further emotional risk is having the self-confidence and self-belief that you have the skills, tenacity, and acumen to handle most if not all situations as they arise.  It is a given that the capitalist system goes up and unfortunately and inevitably goes down.  Each phase of the economic cycle requires using a different set of tools and approaches.  Similarly, each individual business has its ups and downs.  Generally they follow the economy but this is not always the case.  Many new businesses emerge and come to life in a recession.  A new entrepreneur sees a need or identifies a trend and takes the idea to the market.  The market embraces the idea and so the business moves forward and grows.  If the idea is strong enough, it attracts others who also embrace the idea and so competition pushes and refines the idea; another emotion an entrepreneur needs to handle.

So being an entrepreneur comes with different emotional risks.  There are many more than the ones I have identified above.  However, to help an entrepreneur understand and manage the emotional risks, it’s my suggestion that the first main action the entrepreneur puts together is a life plan.  What is a life plan?

A life plan is a very broad and simple document that answers some basic questions.  They will vary with the individual and their situation.  Part of the reason for writing your life plan is so you can share it with the important people in your life and also as a place for you to come back to on an annual basis or as needed to remind you why you decided to become an entrepreneur, including your motivations.

From my perspective, this is critical.  We often decide to do something major in life at a certain point for reasons that make sense at that time.  However, our lives are constantly evolving and changing due to many external pressures, almost all of them outside our control.  To therefore have a document to look back at and jog your memory why you decided to become an entrepreneur can also help you decide in the future if your objectives have been met and it’s therefore time to try something else in your life.

Alternatively, it can be sustaining and invigorating to remind you why you decided to become an entrepreneur and allow you to refocus on that.

Just to repeat an earlier point, it’s important to share your life plan with those who are close to you.  Don’t share it too broadly as it may become a document others judge or hold you accountable.  It’s not a document of accountability, it’s a place to keep your thoughts so you can be comfortable with the decisions you are making.

Some of the thoughts to keep in your life plan can include what’s personally important to you and what you hope being an entrepreneur will allow you to do.  If it’s to support your family and allow you to also contribute to local society, include those thoughts.  If values are important to you, what values will you bring to being an entrepreneur?  What are your priorities and how do you intend to manage those priorities when they come in conflict with other priorities?  What should happen with the business if something happens to you?

The ultimate goal of creating a life plan is so you can become at peace with your decision to become an entrepreneur.

As I’ve mentioned, our lives are constantly evolving and changing.  We adapt every day to change.  Being able to easily and readily adapt to that change will be the main ingredient to your success as an entrepreneur.  Understanding why you decided to start that journey in the first place and being able to remind yourself about this will help you make the many decisions along the way and keep you grounded.  There is also great value in keeping your life plan up to date, at least on an annual basis.  Once again, it will provide a sanctuary for your thoughts in case you have to confront a major event or changes in your life such as a serious health issue, death of a loved one, divorce, birth of a child, a major change in the economy or any other unknown situation.

Owning and operating a business is a serious matter.  However, life is about fun, making mistakes, learning, growing and moving forward.  When owning a business loses its fun and no longer seems to fit in your life plan, it should be enough to tell you that it is time to do something else.

If selling your business is an option you are considering, this link will provide a simple summary of the steps..  If you would like more information then this link will allow you to buy and download a copy of my book Successfully Sell Your Business.

Not everyone will agree but I am sure it’s close to the truth that buying or selling a business is unlike anything else.  Here are four reasons.

First, the price to list a business for sale generally comes from a valuation.  The rules of a valuation come from the law and legal cases as well as the Internal Revenue Code and custom.  The price for most other items of value come from market comparables (for example, when valuing a house), looking up a book or some online site such as Kelly Blue Book (for cars) or results from eBay or some other online service (for any item.)  That is, there is no legal interference with the value of any of these items except a business.

Second, when advertising to find a buyer of these items, with the exception of a business there are no rules.  To be clearer, when selling any other item the owner wants the world to know it’s for sale.  The seller or their broker uses regular and established advertising channels including online web sites, newspaper or magazine advertising, family, friends and anything else to find a buyer.  Conversely, when selling a business, advertising is done using less familiar methods and in most cases, the advertising is obscure so family, friends, customers, employees, suppliers, landlords, lenders and others are not aware the business is for sale.

Third, when a buyer and a seller enter into negotiations for anything except the business, it’s generally very simplistic and does not need the involvement of third parties.  In contrast, negotiating a business often involves complex negotiations with sophisticated parties.  These parties can include lenders, landlords, attorneys, accountants, business intermediaries or business brokers as well as hidden support for buyers and sellers such as family and friends.

Fourth, when selling a business, to get the maximum price possible, normally involves a lot of work for an extended period of time.  The steps the seller takes includes trying to increase revenue, recasting the financial statements to arrive at an accurate and supportable discretionary earnings of the business and repairs and upgrades to make sure the business looks the best.  When selling most items, it’s easy to improve their appearance but with a business there is a limit on what the seller can do and the amount of time to do it.

When the buyer and seller reach a consensus on the main points of the negotiations, all agreements must be in writing.   One of the first items it defines is whether the business sale is an asset or stock sale with this single decision has many tax and legal implications.  Additionally, this one decision in itself, can set off a series of negotiations or at least, in-depth discussion and analysis by both parties.

In some business transactions, the negotiations can trigger a set of different valuations to support each parties position and whether or not the transaction ultimately closes.  For example, if the purchase includes real estate or a large number of physical assets or intangibles such as trademarks or copyrights or the business itself then there could be four valuations.  The first is a valuation of the commercial property, the second is a machinery and equipment appraisal, the third is an intellectual property appraisal and the fourth a business valuation.

Buying and selling a business is unquestionably complex.  The complexity can include the many and diversity of different assets.  Add to this the complexity of the emotions each party brings to the transaction plus the fact that it can sometimes take many months to finalize the deal.  In addition, other layers of complexity include ‘life’ events such as health, legal, family, finance and many other items that affect the final outcome.  For a willing buyer and willing seller to eventually close the transaction, it will require patience and clear communication and normally, the help of a good business broker and other team members.

If you have questions or would like more information, please feel free to call me on 916 570-2674 or email Andrew@RogersonBusinessServices.com

Successfully selling a business requires a lot of preparation, attention to detail and organization. Most sellers badly underestimate both what they need to do and what to do if a qualified buyer comes along. A good rule of thumb is that it takes about ten buyer inquiries to reach a potential buyer who has the qualification to buy the business. There is not a shortage of buyers; there is a shortage of buyers who have the right industry and management, a downpayment and good credit score and the most important ingredient of all, the motivation to move through the process to buy a business. So if you find the right buyer, you need to have you’re “A” game ready.

Here are 5 tips to help you prepare and be ready.

1. Assuming you know what the buyer wants.

Buying a business is a unique experience; every transaction is unique. If you meet a buyer with the right qualifications and assume you understand their needs, wants and motivations it is a bad practice as a smart buyer will not reveal their true motivations.

2. Failing to understand the buyer’s objectives and if the business meets their needs.

Assuming you know what the buyer wants is totally different to clearly understanding what the buyer wants to know from you and whether or not this is the right business for them to buy. If you can meet the criteria the buyer gives you…you are on your way even though the criteria may not ultimately be what the buyer says to you.

3. Improper pre-sale planning and lack of organization.

There are so many steps to successfully selling a business. Being organized and having all the right processes in place is a starting point to try and be successful. This includes the legal forms and processes you want a buyer to sign such as a confidentiality agreement, buyers financial statement and buyer disclosure.

4. Answering the question before the buyer asks.

Be careful to understand the question and then provide the right answer. You may be answering a different question than the buyer is asking…and that can be bad or very bad. When you sell a business there can be great value in listening and answering as clearly and honestly as possible all the questions. Too much information provides more questions, not enough information suggests something is being hidden.

5. Allow the buyer to feel a sense of control in the decision making process.

The standard practice is for all parties to try to control the process. After all, if a deal does not eventuate each party feels they lost something even if it’s only their time. Most deals collapse because one party doesn’t understand what or why a question or process needs to happen at different points in the transaction. Trust is one of the hardest components to create.

Selling a business requires a lot of patience, making sure it’s clear what you are selling, organization so you can respond to questions and requests for information while at the same time being alert to only answer questions at the appropriate time.

If you own a house and decide it’s time to sell, you have a choice. You can choose to handle the process on your own in which case you would be a For Sale By Owner (or FSBO) or you can choose to have a real estate agent represent you. If you own a business or are a potential buyer of a business you can choose to handle the transaction on your own or you can choose to have an agent or Business Broker represent you.

If you choose to have a Business Broker represent you, it’s worthwhile understanding that some Business Brokers belong to associations and these associations have a code of ethics. The International Business Brokers Association (IBBA) is an international association that brings together business brokers from many countries. At last count, there were approximately 28 countries in the IBBA.

The IBBA has a code of ethics and this includes the following articles:

Article 1 – Broker is charged with being knowledgeable with trends affecting business opportunities.

Article 2 – Broker must protect public against fraud, misrepresentation or unethical behavior.

Article 6 – Broker represents interest of their client but it is incumbent upon the broker to deal fairly to other party or parties involved.

In addition to the IBBA, there is the American Association of Business Brokers (or ABBA) plus there are many state or regional business broker associations. A few examples include the California Association of Business Brokers (CABB), Texas Association of Business Brokers, New England Business Brokers Association and many others.

The bottom line is that you should have expectations from a business broker or intermediary you using to represent you and your interests. Being a business broker is not normally restricted to just one skill of closing a transaction. Business brokers assist with business valuations, machinery and equipment appraisals, introductions to third party lenders at banks, credit unions or specialized businesses that handle SBA loans, introductions to legal experts or tax and accounting experts and many other professionals.

At the end of the day, a qualified, educated and motivated business broker should add value to the process of buying or selling a business. There are many associations which they can choose to belong and each has their own code of ethics. This should provide great reassurance that your interests come before those of the business broker and it should be your expectation that this is the case.

Selling or buying a business is a complex and involved transaction. The chances of the transaction closing are greatly enhanced when a business broker or an intermediary is involved as the seller and buyer have a lot of professional, personal, financial and emotional items at stake. Make sure the business broker or intermediary reflects your values and adheres to the code of ethics that are part of any association that they belong. In some states, the business broker or intermediary is required to have a license. Make sure that if this is the case, they meet that requirement.

In the initial stages of listing a business for sale, all the attention is placed on getting the business in shape so it presents as strongly as possible, sometimes doing a business valuation to arrive at the most appropriate listing price for the business and discussing the tax implications to the seller of the business. Tom West is the owner of Business Brokerage Press and he has a great saying that most sellers and buyers don’t understand until they get into the negotiations of the transaction and it is – You name the price and I’ll name the terms.

In other words, price is important but the terms of the deal are much more important. And here are some thoughts why.

If a buyer made an offer for all cash and to close the sale in 30 days and another buyer made the offer subject to getting a loan and to close the sale in 60 to 75 days and you are the seller of the business, which offer would you want to accept? If they are both offering the same price for the business it would be a no-brainer to accept the cash offer.

Using the same scenario as above, but the cash offer was 5% less than the offer from the second buyer and you are the seller, which offer would you accept? Your answer would probably be – it depends. Some sellers may be willing to accept the cash offer and close the sale. Some sellers may be willing to accept the higher offer as the price difference of 5% could be more than enough to offset waiting 60 to 75 days to close the sale. Most sellers, I would think though, would include other factors into their decision. Which buyer do they think is more qualified to buy and operate the business? Which buyer would be able to get approval from the landlord to take over the lease? Probably the most important question the seller would want to know, however, if they accepted the offer from the second buyer, is what are the chances the buyer will get their loan application approved? If the seller is not sure the buyer would be qualified, taking the cash offer at a 5% discount may be much more attractive.

In the current economy, the seller must be willing to carry a note for part of the purchase price. Very few buyers have the capacity to pay cash for a business. Also, in simple terms, it’s ‘good business’ for the buyer to use cash as a down payment on the business but then leverage the rest of the purchase price via loans as any interest paid is tax deductible. This also allows the buyer to buy ‘more business’ which means if the business is performing well and throwing off the right cash flow, the buyer can get more cash flow for each dollar of down payment. This is obviously attractive to the buyer.

The terms of a deal don’t just swing on the price and whether or not the seller will carry a note. These are both very critical questions but whether a deal works or doesn’t work can include many things. These include how much free training the seller is willing to provide, if the seller is needed to provide paid training after the free training, what costs are incurred for the business to change ownership and who pays them. For example, using a title company to handle the escrow will incur fees, the landlord may charge a fee to process an assignment of the lease, if the business involves a franchise there may be a franchise transfer fee, how long should the covenant not to compete be in terms of distance and time, and there are many other items.

Buying and selling a business involves many complexities. The longer both parties take to reach agreement on the complexities the greater the chance the negotiations will fail as one or both parties burn out from the inability to reach an agreement.

Obtaining finance to buy a business is particularly challenging. One of the advantages of buying a business in the United States that very few other countries have to assist with this process is the Small Business Administration or the SBA as it is commonly called. If you have retirement money in a 401(k) plan, this money can be used to move into a corporation and fund the purchase or down payment to buy a business. This option can be combined with an SBA loan. Both of these processes are very formal and deliberate and therefore take time, but if applying for an SBA loan is part of your business acquisition plan, consider the following 5 tips.

1. SBA lenders make their decision to approve a loan from a risk model not an opportunity model. That is, you can have the next best new business idea in the world but SBA lenders approve loans against cash flow. That is, if the business exists and it has positive cash flow, that’s the first thing a lender wants to see.

2. If you want to use the loan to buy an existing business with a positive cash flow, the banks will understand that the current owner of the business will most likely have non-business expenses sitting on the business profit and loss statement so it reduces the amount of tax the business owner pays. These non-core non-business expenses are called add-backs and to get at the net operating cash flow of the business, they will accept a reasonable number and amount of add backs through a recasting of the financial statements. These add backs must be legal and easy to identify.

3. A recent requirement to the SBA loan application process is that the banks need to obtain an independent third party valuation of the business to support their loan decision process. The valuation must be realistic and defensible, that is, the appraiser needs to explain in their valuation report how they arrived at the final value of the business.

4. If a lender approves an SBA loan and the borrower defaults, the SBA has auditors who look at the loan application and approval process used by the bank. The auditor’s ultimate responsibility is to understand the loan application process and why it was approved and then understands why the borrower defaulted.

5. If the SBA loan auditors are not satisfied the loan application was handled correctly, they can withdraw the ability of the bank to approve SBA loans and be covered by the risk mitigation the SBA provides. If the bank does not have preferred lender status, the bank can be prohibited from applying for presenting loans for approval.

The bottom line is, banks have a lot at stake including not getting it wrong; so be patient with their process as ultimately the person at the bank who approves the loan is responsible. The SBA loan process provides great help to business buyers (and indirectly, business sellers) as it provides a source of funds for entrepreneurs. Over recent years those rules became much more difficult and therefore saw a large drop in the number of loans approved. This is now starting to change but a business must present itself in the best light possible to have any chance of obtaining an SBA loan.

The process to sell a business is not a quick and easy matter. At the moment it is taking about 8 months to sell a business, if it sells. This means the business sits on the market for about 6 months before finally getting an offer from a buyer. Once the negotiations finish, due diligence commences and closes and escrow opens and closes we arrive at the 8 month period. And this applies if the business sells. Depending on which statistics you read, approximately 75% of businesses never sell.

As the entrepreneur looking to sell and transition out of being a business owner, it’s not a quick process. It can even drag on if the buyer wants the seller to continue in an active role in the business in some capacity. At the end of the day, however, it all needs to make sense to the entrepreneur and the best way to do that is to build a transition plan.
What should be included in the transition plan? A transition plan can overlap with an Exit Plan. An exit plan is essentially a process to exit business ownership. A transition plan is a strategy to manage the protection and eventual transfer of assets or stock in a proactive, tax efficient manner. Essentially an entrepreneur can have 5 types of assets. These are Personal Property, Real Estate, Business Interests, Insurance Plans and Employee Benefits.

Personal property includes savings, stocks, bonds and personal effects. Real estate includes both residential and commercial property. Business interests include the business legal entity such as a corporation, partnership or LLC. Insurance plans include life, health and annuities. Employee benefits include pension, 401(k), IRA and stock options.
Creating a Transition Plan touches all aspects of an entrepreneur from the obvious personal financial need and therefore personal security to matters such as tax and perhaps not always recognized, the emotional needs of the entrepreneur. At all times the emotional needs of the entrepreneur are always exposed. Things like divorce, health issues, family issues, personal safety and disability are always looming. The pressure of the business from customers, suppliers, landlords, employees, government agencies, lenders and a myriad of others constantly keeps an entrepreneur thinking, planning and reacting.

When transitioning the ownership of a business there are many options. An outright sale to a buyer is one of the most obvious but there are 4 other possible options. These are selling the business to the employees through an ESOP program, sell through a Charitable Trust, transfer to a family member and sell to a partner. In certain circumstances, the owner could take the business public and sell his interest via an Initial Public Offering or IPO but most businesses would not meet the criteria including handling the associated costs.

A quality Transition Plan is all about success. Its ultimate goal is to ensure that the business and the owner moves from one state to the next. The best analogy I like is that it’s like juggling two snowflakes. Every snowflake is unique because of temperature, the absence or inclusion of a piece of dirt, the number of water molecules, spins of electrons, hydrogen and oxygen etc. So too is a business and its owner. To preserve and maintain the business and protect its uniqueness it must be treated carefully and properly. The same applies to the owner. The owner can live without the business and the business can live without the owner as long as proper care and attention are given to each so when the next owner comes along with their uniqueness, like another snowflake, it has to make sure it can mesh with the business and both be successful.

A business should be a constant ball of energy moving in different directions as the economy changes, new tools and innovations come to the market, the stress and strain from competitors and the ever changing demands of customers. This is what gets an entrepreneur out of bed every morning; the chance to do something different, learn something new, to see the rewards of hard work, to plant new ideas and watch them grow or to help someone do something they thought they may not be able to do.

If the entrepreneur loses the hunger to learn, be the vision and leader of the business, it’s time for a change. Because a business is so dynamic, it requires leadership. If this doesn’t happen it will shrivel and die. Capital, time and energy must keep moving otherwise it will fade away.

If the entrepreneur leading the business recognizes it’s good business to plan for a change of ownership and therefore handle the matter in a proactive way, the chances of success are so much greater and so are the chances of getting the highest price possible. There is a very simple reason for this. The buyer of a business looks at and includes many things in their decision making process. However, there are basically two ingredients, the cash flow the business generates and its potential to generate more cash flow in the future. If either one is missing, the buyer will require a discount on the purchase price of the business. If both are missing, it will be a business extremely difficult to sell.

As the entrepreneur works through their decision to sell the business, a critical component that will help them do this successfully is to start putting into place things the entrepreneur will move to after they sell the business. It can be intriguing to watch older entrepreneurs work through the process of selling a business, handling all the negotiations and questions from the buyer and just prior to signing the documents to transfer ownership to the buyer, decide not to sell. The reason they decide not to sell is because the appeal of cruising the world or playing golf 5 days a week or looking after the grandchildren all of a sudden doesn’t have the same appeal as going to work each day. So a good exit plan for an entrepreneur as its first priority needs to have a clear strategy detailing to what the entrepreneur is going to move.

The next ingredient is to make sure a good team is in place to advise and protect the transition of the business. The team can include accountants, business attorney’s, financial planners, lenders and a business broker to market and handle all buyer inquiries about the business. The most important ingredient to the entrepreneur is trust. If the entrepreneur does not have a trusting relationship with any of the people on their team, they need to be replaced.

Each entrepreneur will have a different risk tolerance to different aspects of the transaction. The current market conditions require a seller to be part of the finance of the transaction. Third party lenders can bridge the gap between the buyer down payment and the seller note, but the seller has to be willing to be in a second position on the loan.

Each exit plan will differ for each entrepreneur. My golden rule is that when selling your business, put your feet in the shoes of the other party and see things from their perspective. This is true not only for the buyer who has no history of the enterprise, has to put down a sum of money they may never see again, has to take the emotional risk of not only being good enough to own and operate the business as well as the current owner, but learn as much as possible as quickly as possible or suffer the embarrassment of it all crashing down on them.

Part 13 and the final article in this series looks at the Transition Plan and how it completes the role and responsibility of the entrepreneur.

Most business owners have or understand the value in business insurance. It protects the business in case an insured event happens and rather than the business owner wasting time and losing business by addressing the problem, the insurance company takes care of things. Business insurance makes good business sense.

A good form of insurance but one only the business owner can handle is creating a Disaster Recovery Plan. It doesn’t sound very attractive and it doesn’t sound like a good use of time but let’s consider the following.
If your business was hit by a severe storm, hurricane, truck or car that was out of control, flood, tornado, lightning or hail, earthquake, disease or pests, unusually high temperatures that caused damage to the building your business is in or some other unpredictable occurrence, how would this affect your business? What about a building fire, hazardous materials incident, sabotage, a loss of key staff or power disruption? Perhaps ask the same question in a different way. If something occurred to damage the business and you were out of action for a week or so, could your business survive?
The point of all this is to put a Disaster Recovery Plan together.

With each disaster there are three phases; Response, Mitigation and Recovery. With a defined Disaster Recovery Plan, each of the three phases means there is less downtime in each phase and could mean the difference in saving or losing the business.

Here are some important ingredients to include in your Disaster Recovery Plan.

1. Make sure everyone is on board with the plan and understands their role.
2. Create and train a critical management team who can plan, check and execute.
3. Document any hazardous or business critical items so a mitigation strategy is developed and agreed upon so response time is kept to a minimum and its laser focused on the critical areas.
4. Create, document and test any mitigation strategies so the business can return to normal operation as soon as possible.
5. Test, evaluate and maintain; and do this every 3 months.
6. Make sure you don’t forget step five.

This article is not an advertisement for insurance but there are many insurance products available. These include Property insurance, Flood insurance, Business Liability insurance, Workers Compensation insurance, Business Interruption insurance, Umbrella insurance, Errors and Omissions insurance, Disability insurance and Employers Liability coverage.

All disasters, by definition, only allow a certain number of things to be done in a window of time. The first thing to therefore establish is priorities and these should be people first, business criticalities for the future of the business and then things. First and foremost, people include the owner’s immediate family, the employees and customers. If home or business neighbors need help then that too should be included. Help should include knowing where and when to send people out of the danger area (don’t send them to another danger area) including an agreed place and time to all meet, having a list of readily available contacts including an agreed means of communications and tools, having the appropriate medical equipment including medications if necessary and a list of contacts to emergency centers so they can be contacted for updates. It sounds basic, but the need to avert panic and poor decisions needs to be top of the mind.

Finally, copies of all critical records require a systemic and deliberate process. If paper records are copied and archived in a different location why not make an extra copy or two and archive them elsewhere. Computer data and a deliberate back up strategy should now be part and parcel of any small business that uses computers. Online back-up services are available for little to no cost and work very well.

Disasters cannot be avoided. History repeatedly shows us that we choose to ignore disasters at our own peril. Good management includes preparing for a disaster and strategies are readily and easily available. Include making a Disaster Recovery Plan as part of your business assets. If you have one in place; congratulations! If you don’t have one, create a deadline and make sure it gets done. Consider putting a team together and have them handle all the pieces and bring a final report back to you.

At some point, all business owners will exit their business. It’s just a question of whether it’s in a wooden box and is therefore an unplanned event or on a cruise ship as a planned event.

Part 12 of this article series looks at the importance of an Exit Plan and how to put it together.