What would happen if you didn’t turn up to work?
A lot of small business owners dream about this day – when the business runs itself and is not owner dependent. Some get there, most don’t.
But you don’t always get a choice. What would happen to your business if you couldn’t be there for one, two or three months?
For most of us, that is not something we are planning for and, certainly, start-up businesses tend to be highly owner dependent. Increasingly though, we are seeing cases where accident, illness or an unexpected family crisis throws all of your business plans into disarray.
The question to ask yourself is if this happened to you what would happen to your business and your investment in the business?
For many it would put the business and the investment at risk and, in most cases, it would have a negative impact.
Here are five things that will help reduce that risk:
1. Insure your income
If you are dependent on your income from the business and would be in financial stress without it then you should consider having an income protection insurance policy. You may also need a policy to cover your business overheads if you were off work.
2. Give other people responsibility
This can be a challenge for some business owners. They like to be in control and to have the final say on everything.
You can be in control but have delegated responsibility to other people. It is always better to train people into roles before they are required. It allows you time to develop and test them.
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3. Put strong systems in place
Too many small businesses work out of the owner’s head. You may work to a system but unless that system is visible and able to be followed by other people, it is not adequate.
Systems provide you with control. It tells people what to do and when to do it. It removes discretion and protects the business. You can always measure performance against an agreed system.
4. Have a reporting process in place
There will be key areas around your business that you need to know. A simple reporting system should tell you where the business is up to and how it is performing.
As you delegate responsibility and have systems in place your reporting will tell you if everything is on track. It should also provide some warning signals of any emerging problems.
5. Test your business dependency
As you develop your business, take some time off and see what happens. What happens when you are not there is the real litmus test.
The great thing about this is that whilst you are doing this to risk-protect your business, there is another outcome: You are increasing the value of your business and building an asset that one day you will be able to sell.
Greg Hayes is a director of Hayes Knight and specialises in taxation and business planning advice.