Unexpected business issues: It pays to plan
Without considering some fundamental business issues, an untimely event such as the death of a business owner or sudden outside influences can leave a family business unstuck.
The Pandemic led to a reappraisal of traditional work and commuting patterns which have led to a number of changes including where people wish to work and when to retire. It sparked a re-evaluation of the most important things in life for many and this has driven change.
Credit squeezes, Brexit, supply chain pressures, people issues and the energy crisis have only added to the challenges of changed attitudes and lifestyles. The business environment that we find ourselves in today, is, in many cases, fundamentally different to just a few years ago. The march of technology and the impact of AI and cyber security just sustains the dynamic environment of change in all aspects of a business. Only very recently, the effects of the Microsoft Azure failure, caused disruption and loss to businesses and individuals across the world.
In such an environment, it pays to check your business is fit to undergo a period of difficulty and the unexpected that necessitates change and risk management. There are many things beyond our control, but that should not prevent planning for the future and identifying and managing business and commercial risks. Here are some interesting scenarios which are not as uncommon as you may think.
Case study oneAn elderly and successful entrepreneur had neglected to consider the matter of succession and unfortunately died suddenly and unexpectedly. Throughout his life he had kept his business closely controlled. This caused a number of problems on his death. Firstly, he was the only signatory on the bank mandate. Secondly, he was the sole director of the company. Rather than being a peaceful ending to a successful life, his death immediately triggered an existential business crisis with suppliers and employees due to be paid and the company potentially hamstrung in its capacity to respond. Luckily at an early stage there was just sufficient time to assist the sole remaining officer (a company secretary) in taking urgent corrective action in the right order such that the bank was not obliged to freeze the account. |
Case study twoIn this multi-generational Limited Liability Partnership (LLP) valuable business property was being held personally rather than in the partnership. While the business had its ups and downs, it was successful and well financed, allowing it to survive tough times and see off rivals. Like the first scenario, this was another case of strong, close personal control. As the matriarch eventually grew old, the next generation began to manage the business. However, no thought was given to amending the bank mandate or considering who should be members of the LLP. Sadly, two generations died in close succession. For a while the business’s only member belonged to the third generation and matters were finely balanced. On this occasion we were able to help the family, manage the Inheritance Tax and appoint new members under whose stewardship the business has strengthened with a clear exit strategy. |
Case study threeA business lost the capability to access its records due to a localised systems outage that prevented it from managing time critical functions for its customers. Fortunately, the business had carried out a Failure Mode Effect Analysis exercise with Crowe and had a written routine that accessed backup data and servers in another location that was not affected by the localised outage. The business managed the situation with minimal external effect or any loss of revenue. |
Lessons to be learned
Even small businesses need a contingency plan (sometimes called a Business Continuity and Disaster Recovery Plan), in case of unforeseen disaster. Many think of these in physical terms (fire, flood, security), financial (fraud) or technology (blackmail from ransomware). While few people want to think about becoming ill or dying unexpectedly, perhaps the top of the list should be the fundamental issue of management succession and bank administration.
