You work hard to keep your business running in order to support your family, business partners, employees and suppliers, and to meet your customers’ needs. But what would happen if something happened to prevent you from working?

About 30% of small and medium-sized Canadian companies that faced financial difficulties were affected by events out of their control, according to a report from the Business Development Bank of Canada (40 page PDF).

Contingency planning

A contingency plan allows you to make preparations to keep your business operating without you if you experience:

Follow these five steps to start your contingency plan:

1. Decide who will take over temporarily or, if necessary, permanently

Do you have a “second-in-command”–a partner or team member who has enough knowledge to run the business—or do you need to recruit one? Ideally, someone in your company should have the information, expertise and capacity to step in immediately to keep your business running if you can’t. If your absence is permanent, you could decide to appoint someone to take over for the long term. This could help avoid confusion and reduce stress by giving your team one less thing to worry about in your absence.

2. Speak to legal, accounting and financial experts

Seeking advice can help you evaluate relevant options and make the right decisions for your business.  You can also ensure that your contingency plan aligns with your will and other legal documents, such as separation agreements and divorce judgments.

3. Explore insurance solutions to finance your absence

What will your absence cost? Your business may have extra expenses, and you and your family may need to find ways to supplement your income if you’re unable to work. A mix of life, disability and critical illness insurance can provide well-rounded protection, and there are many specialized insurance solutions designed specifically for business owners.

4. Discuss your options with your business associates and family

When it’s executed, your contingency plan will affect many people. It’s important to get input today from your partners, employees and family. You can ask your:

5. Put your plan in writing

It’s not enough to have a general sense of what will happen to your business if you can’t work. A thoroughly-documented contingency plan will help ensure everyone affected understands its provisions. Also, you can set a schedule to regularly review and update your plan. You may even want to consider including an expiry date or termination clause.

Read more on this topic:

Manulife “Succession Planning at Manulife: Maximizing the value of your business” (booklet)

Business Development Bank of Canada – “The five do’s and five don’ts of successful businesses” 

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