Don’t run your business without a backup plan
Throughout this year, I’ve been sharing 10 tips that will help your business run better, operate more profitably and create value when it’s time to sell. In this edition, I’ll talk about the one thing no one wants to plan for but needs to. What do you need to do to be prepared if the worst happens?
Planning ahead is good business
Simply put: Don’t run your business without a backup plan. If you are incapacitated — or in the event of your death — have someone who knows the business and what to do.
Whether you are a one-man show or a multimillion-dollar business, you should always have a backup plan for who will run your business when you cannot. This could be your spouse, management team, attorney, CPA or someone else. Whoever it is, this person should be authorized and equipped to act on your behalf. Even if you are just temporarily incapacitated, you should have someone who can step into your shoes until you return. If you cannot return to the business, make sure that person has what they need to run or sell it.
If your business depends heavily on you, a partner or another key employee, you may want to investigate key person insurance. With such a policy, the business entity (not the executive or other key personnel) purchases the policy, pays the premiums and is the beneficiary. Key person insurance can cover business owners or partners, key executives or salespeople, or other employees considered critical to the business.
Key person insurance can provide the business with cash to help it continue operating after the death of an owner or other critical employee. For business partners, separate succession planning should address what happens to an owner’s interest in the company after death.
Selling after the worst has happened
I have worked with several operators whose families contacted me after the worst happened to help sell the company. As a broker who knows how to extract the information needed from a VMS, I can work with the survivors to gather the information needed to value and market the business.
An experienced broker can work with the survivors to determine the business’s value and present it to qualified buyers on the seller’s behalf. Better yet, a broker can have everything set up in advance to help the surviving spouse or family.
If you don’t use a broker, make sure a trusted CPA or attorney knows who to contact in the event of your death.
Could someone run your convenience services business tomorrow?
If you were suddenly unable to run your business, would your spouse, partner or designated backup know:
- Who is responsible for day-to-day operations and has the authority to make decisions?
- How to access your VMS and pull customer, route, sales and equipment information?
- How to access accounting, payroll and other critical business systems?
- Who your key employees are and how to reach them?
- Where to find customer contracts, equipment records, leases and other important documents?
- Who to contact at your key suppliers, distributors and service providers?
- How to reach your CPA, attorney, insurance agent and business broker?
- Where secure instructions for accessing passwords, banking and other sensitive information are stored?
Whether or not your spouse or other family members are involved in the business, you should have these discussions with them. Document all of the essential details and decisions in a secure, accessible file in case something happens to you, and you can no longer run the business. In addition to succession planning details, you should include instructions for accessing passwords and login information, key contacts and other information survivors will need. For convenience services operators, that could include access to the VMS, accounting system, customer and route information, equipment records, supplier and distributor contacts, payroll and banking information, leases and contracts. Make sure the appropriate people know where this information is securely stored and how to access it.
The last thing you would want is the business you created to crumble, leaving your spouse or significant other to deal with running a business they have no idea how to run or how to sell. Over my years in this industry, I have seen this happen to independent operators. Spouses were left to sell the businesses at pennies on the dollar and part them out. Employees were left on their own with no one in place to run the business. Needless to say, that owner’s business basically vanished.
If you do not have a will set up, you should, at a minimum, write a letter telling your spouse, significant other or other trusted person what to do in the event of your death. We all hope nothing happens to us while we own a business, but “hope” is not a business plan.
Watch for the full series from Mike Ferguson, only on VendingMarketWatch.com:
10 things NOT to do in the vending and OCS world
Avoiding these 10 mistakes can help you run a successful business and keep it ready to sell.
- Don’t skip using technology. It makes selling the business difficult during due diligence.
- Don’t become a hands-off owner. Trust but verify.
- Don’t think bigger is always better. Don’t just take an account to take it. It must be profitable.
- Don’t run your business without a backup plan. In case you are incapacitated or in the event of a death, designate someone who knows the business and what to do to step in if the worst happens.
- Don’t keep smaller accounts. Keep sales at a minimum of $ 5,000 per year. Preferably $10,000 per year.
- Don’t cheat in the business.
- Don’t let the majority of your sales be in one to five accounts.
- Don’t think that vending management location firms are all good for your business. There can be consequences if you sell your business.
- Don’t skip pre-kitting. Invest in technology and a warehouse automation system.
- Don’t try to sell your business yourself. (Within reason, depending on your sales.)
About the Author
Mike Ferguson
Mike Ferguson is the owner of VMAC Solutions LLC, an intermediary business broker who has owned and operated a vending and office coffee business. He specializes in selling office refreshment businesses.
A former business owner, Ferguson brings firsthand operator experience to the sale process, helping owners position their businesses for qualified buyers and realistic valuations. His approach emphasizes clear, practical guidance rooted in industry knowledge, with a focus on helping owners achieve strong outcomes.