CBC News is reporting this morning on a TD Waterhouse poll result indicating only about a quarter of small businesses have a succession plan in place for when the founder/owner retires.

That’s pretty bad, in and of itself. But even worse is the fact that right now, most small businesses are completely reliant on their founder/owners as principal marketer and salesperson, operations head, director of HR, head of procurement and supply, production manager, etc. etc.

It’s inevitable that a small business owner will do most if not all of the work at the beginning, but as the business grows, the company’s knowledge, skill set, and processes must be progressively systematized. The key is to get what is in the owner’s head out into the systems and processes and structures of the enterprise. This is so that employees can act and innovate based on the owner’s knowledge and acumen.

A few years ago, I was chatting with the president of a small tool supply business. The owner, a man in his early 50s, had succumbed to a massive heart attack and died on the job. When everyone in the company got over the initial shock, they realized that everything of consequence about running that business was in the owner’s head. We’re talking processes, supplier lists, client contacts, stocks, financials. Everything. The new president admitted freely that the company almost went under, simply because no one knew who to contact upstream or downstream, or even the full picture of the business. Disaster was averted (beyond the death of the owner), but it could easily have been otherwise.

Companies, even very small businesses, need to think about worst case scenarios. For a small business, the worst case is always the permanent or temporary loss of the owner/president. Can the company operate for a length of time without it’s principal impetus to action? Would employees know who to call at clients or suppliers? Do they know who the insurance brokers are? Do they have a relationship with the banker? How about the accountant?

The owner doesn’t need to die for this to be a major hindrance to the company. It could be personal or family illness, injury, or just overwork, leading to the principal not being at his or her personal best for a length of time.

The time to prepare for these situations is now, when everything is operating smoothly. Even small businesses must improve their robustness. This is the ability to survive and even thrive in adverse circumstances.

© 2011 Richard Martin. Reproduction and quotes permitted with full and proper attribution.

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