Kitchen & Bath Design News

AUG 2017

Kitchen & Bath Design News is the industry's leading business, design and product resource for the kitchen and bath trade.

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IF YOUR KITCHEN and bath firm is one that employs less than 30 people, it's likely that very little critical responsibility is delegated to others. Over the past 10-15 years, the advance in communication technology has allowed a single person to extend control to ever-wider areas of a business. As a result, few of our employees have much experience making "weighty" decisions. Every day we open the doors to our busi- nesses and are faced with a never-ending string of challenges and opportunities that will consume our day. It's not surprising that few of us seem to have the time to give any thought to what would happen to our kitchen and bath firms if something were to happen to us. However, it's important that some time and effort is spent planning for the eventuality that the business may need to carry on without you. This month, we will look at some suggestions as to how one might approach planning for that. Any such plan will, naturally, take into account the structure of your organization, so an assessment of this is the place to start. CURRENT ASSESSMENT Here is a list of questions to start this planning: • If I did not come in to work today, what would happen and who would be in charge? • What would the impact be to our sales volume without my participation? • Will production on our projects contin- ue without my direct involvement? • Are there sufficient cash reserves to get our company through the initial adjustment period? • After the initial adjustment period, can/should the business continue on without me? The first question leads to an evaluation of the type of organization that is in place in your business. Most of our businesses em- ploy fewer than a dozen people and do not really have a "middle management" level of employees. It's typical that each employee has specific responsibilities and the supervision and coordination falls to you, the owner. In larger organizations, there usually are mid-level managers who handle the day-to-day decision making. Partnerships involve a unique set of circumstances that will normally provide the "in charge" individual to step in. We will focus on the smaller organization, where the owner's absence will have the great- est and most immediate impact. In this case, the establishment of policies and procedures for the business is essential so that everyone knows how business is to be conducted without constant supervision. Properly implemented and followed, such procedures will allow a busi- ness to continue to function for a reasonable period of time if you are not available. Established procedures deal with what would happen at first, but this does not establish who would be responsible for those decisions that the policies and procedures don't cover. There is likely a person within your orga- nization that you work through when you're off on vacations or absent for other reasons. This is probably the person that you should designate as the "in charge" person to handle the initial phase of any future absence. Now that you have a vision of what would happen if you were unavailable for a few days, the next thing to address is a "Disaster Plan" in case your absence is longer term or perma- nent. The disaster plan should designate who is going to be the responsible person charged with final decisions. This may, or may not, be someone within the business. If your family is involved in the business, they will usually step in to deal with the more important decisions involving finances, etc. If there are no family members capable of fulfilling this role, then an attorney, accountant or other trusted advisor should be sought out in advance and identified in your disaster plan. Begin with a written disaster plan that will sp ell out how your business should function without you present. The questions above pro- vide an outline of the form this plan might take. At the earliest possible time, whoever will wind up in the ownership position should meet with the person, or persons, who will be in operational control of the business to clarify responsibilities. It will be important that these people establish and maintain good communi- cation throughout the transition process. The written plan you prepare should deal specifically with the short term, setting out how the business will function for a few weeks with- out you present. If you have, in fact, designated who is in charge, that should be communicated to all concerned immediately so that employ- ees, sub-contractors, customers and suppliers know where to look for direction. If your business comes to a point where your disaster plan needs to be implemented, the "ownership" representative and the opera- tional person should arrange to meet with all employees, critical sub-contractors and bankers to review the situation and reassure them that there is a plan and things are under control. Make sure that whoever is going to speak for the business will be able to address both the short-term and long-term situation. The next issue that should be addressed is the short-term viability of the business. It is essential to retain critical employees and staff if the business is to continue. It will be necessary to have your designated "in charge" person meet with the entire staff and lay out the plans for the future to reduce the uncertainty that is sure to prevail. If you don't have adequate cash reserves to pay all of the bills for one month, you should arrange for a line of credit that will remain in force even without you in the picture. PLANNING FOR THE FUTURE It will be much easier to deal with the aspect of an unplanned exit if there is a plan in place for your ultimate (planned) exit from your busi- ness. Like the disaster plan discussed above, exit plans have a way of being put off indefinitely. The first step is to pick a date for that exit and then start planning for it. In all likeli- hood, it will normally take several years to plan and implement an exit. Once a date has been established, the next step is to identify a successor. This may be a child or other relative who is working in the business. It could be an employee capable and enthusiastic about taking over the business, or it could be a competitor wishing to expand. Exit plans, or succession plans, require that one acknowledges that they will not be around forever and have a desire to leave their business under their own power and with enough re- sources to enjoy that next phase of their life. ▪ " It's important that some time and effort is spent planning for the eventuality that your business may one day need to carry on without you." Read past columns and features and send us your comments about this article and others at KitchenBathDesign.com Succession Planning for Your Firm BRUCE KELLERAN, CKD, CPA 28 Kitchen & Bath Design News • August 2017 BUSINESS MANAGEMENT

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