Cliff's Notes

“Everyone has a plan, Until they get punched in the face!” … Mike Tyson

We all have plans to protect ourselves and our families but unfortunately most of us have that plan in our heads or a written plan that is several years old. As we have seen over the past several months, along with the weather related issues in the south over the last several weeks, things happen and disaster is real!

It’s Real … The 2020 global pandemic rocked the world and it’s not over yet. How many people planned for a 3 month shutdown of life? I can’t think of anyone who was ready for that. Insurance companies denied “business interruption” insurance claims and all revenue generating production stopped. The government provided funding to help maintain the work force and cover some expenses but everything else stopped.

Disaster comes in all forms … When we think about a disaster we think about storms, fires and floods but what about all of the other scenarios that can develop. As a business owner everything you depend on has a disaster liability. From the electric to turn on your lights to death or disability, there needs to be a written and up–dated plan for response. One of the most overlooked and misunderstood disasters is not having a partnership buy/sell agreement.

The Partnership Buy/Sell Agreement … You may become a partner or take one on for a variety of reasons but is there a planned separation agreement? Taking on a partner is like getting married, everything is community property unless outlined by a legally binding agreement. Unforeseen things happen all the time. What if your partner had a car accident that left him/her permanently disabled or worst. Do you want their spouse or estate to be become your new partner? Guess what, unless you have an agreement in place they already are. Now you have to buy out the other side while dealing with, understandably, irrational emotions. You have to buy back your business.

Buying Back Your Business … Transitions are never easy. Money and emotions do not mix well. Pre–determined values are essential to formulate a buy/sell agreement. The funding for that agreement should also be securely in place. If you have a business that is valued at $1M, you would need $500k to buy out a partner or an estate. But what about key personnel?

Key Personnel … The ultimate disaster for a business is the death of an owner, principle partner or manager. Replacing that person can be difficult and expensive. A key personnel insurance policies should also be part of a disaster recovery plan. Talk to your legal and insurance advisor for more insight and options.

Disaster Recovery … I can’t tell you how important it is to prepare for that day that you get punched in the face and have to get up quick. You need professional advice and yes, it will cost a little money. 

Money … I am not a legal or financial expert but I did run a fair size company for a lot of years. The best investment you can make as a business owner is quality, industry specific, consultants. Legal, financial, insurance.

October 18, 2020 Posted by Cliff's Notes Blog | Uncategorized | Leave a comment