More Reasons to Add Contingency Planning to Your Exit Plan

exit-planning_contingency-plan-smallIn my last post I laid out some great reasons to incorporate into your Exit Planning process a Contingency Plan for who will run your business if for some reason you are not able to. Let’s look at some more advantages to this. Have you thought about how having a Contingency Plan in place may actually help you win new customers and land additional sales?  Think about it – no one wants to be dependent on a supplier who might be out of business tomorrow!  Communicating to your customers that your company may be better prepared than your competition for such eventualities could make the difference between coming in first or second place in a competitive sales environment.

You may be thinking that a good Contingency Plan should go beyond planning coverage for just the owner’s duties.  You are absolutely right!  Any good plan also includes dealing with how the company will provide for the untimely short term or permanent loss of any key employee.  A common complaint of many business owners who do not have a Contingency Plan is that instead of managing their business, they are constantly spending their days filling in or training new employees to replace key employees who leave unexpectedly.  That is not a good use of a business owner’s time and skills.

Having a Contingency Plan is also a good idea when you decide it is time to begin exiting your business for more positive reasons like traveling or doing some of the other things in life you always wanted to do besides working 12 hours a day.  It means there will already be a proven management team available to carry on the business as you transition out.  Another plus is that having a management team already in place when you begin negotiations also adds significant value to any business that will be sold to a third party.  Most buyers will pay more for a company with an existing management team compared to one where the most valuable employee (its owner) is going to leave the business soon after the sale.

If you have a good Contingency Plan, you have the knowledge that your business will be able to survive the untimely loss of any key employee, including yourself.  That same Contingency Plan will add value to your business now and in the future.  My years of experience with owners exiting their business have proved it to be a worthy investment.

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About Gary T. Brooks

Gary T. Brooks has over 27 years of experience in the investment banking industry and has been involved in over 100 transactions. He is currently the CEO of ExitPlanPros, where he helps business owners grow their business while planning their exit.

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