Devon found an old quote the other day, “The graveyards are full of indispensable men.” Since it’s usually attributed to Charles De Gaulle, former president of France and a military officer during both World Wars I and II, it’s probably a grim comment on war.
It led to an interesting discussion. We like to think we’re indispensable, but we aren’t. One way or another, we’re all going to leave our business. If it happens unexpectedly, will those left behind be able to either carry on or close shop without your presence? If it happens to one of your key employees, how difficult will it be to carry on without them?
You can certainly work at preventing that possibility. Taking care of your health, watching your weight, eating properly, drinking in moderation, avoiding tobacco and the other recreational substances that are much more available today. I’ve always taken care of myself but made the mistake in my younger years of not protecting myself from the sun. Every six months, my dermatologist carves another chunk or two out of me. That’s why I cringe every time I go by a job site and see young people working without covering their arms, back and legs.
Over the years I’ve seen many construction companies come and go. Many go because they couldn’t survive financially, usually because they didn’t charge enough for their work. I believe most business failures are preventable, and list other mistakes that impact cash flow in these articles.
However, I’ve been at this long enough to see businesses close shop because of the death or incapacity of the company owner. Is your business prepared for that possibility?
If something happens to you or a key employee, your business loses valuable knowledge, experience and skills. Sales and production will be disrupted; some clients may refrain from working with you. When sales don’t happen and/or jobs aren’t getting built, cash flow is impacted. It’s not unusual for clients to stop making payments out of fear their job will be delayed or not be completed.
Put Critical Things in Writing
Devon keeps an “If I’m Dead or Incapacitated” book near her desk. You, and every key employee, need something similar. Here are a few things to include:
- All financial account names and numbers, with addresses, phone numbers, etc. Put sensitive items in a password-protected file and let a few trusted individuals know how to access it.
- A list of all company assets including real estate, vehicles and tools
- All company liabilities including mortgages, leases or loans and related contact names and phone numbers
- Contact info for all key people in your business
- A complete list, with contact info, of those you do business with. Your suppliers, subcontractors, insurance agents, attorney, bookkeeper, CPA, lenders, associations, and others.
- A list of your responsibilities.
- Who should step in during your absence.
Once you’ve documented everything, it’s easy to set it aside and call it done. It’s not. Things change, and your documentation needs to be updated with every change. Old facts won’t help anyone. You can’t write down too much; you can write down too little.
Other Details
You need to have your will in order. As a business owner, your will should include what happens with your business when you’re gone. If you want to pass it to your heirs, who should run it? If you want it sold or dissolved, who makes the decisions?
You also need a Durable Power of Attorney for financial affairs, both the business and personal. That document gives someone you trust the ability to make financial decisions if you can’t. For your family, it’s also smart to have a Health Care Power of Attorney to handle critical health care decisions that might arise.
Your business should consider key person insurance on both you and all key employees. You should also have enough personal life insurance so your family will be, at minimum, debt free.
We can take precautions and believe we’re indestructible, but the reality is that we aren’t in charge of our future. So be prepared and ask your key employees to be prepared as well.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations as needed.
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