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No. 1: Assess Your Critical Business Functions
Prior to his stroke, Correia had not created a formal business continuity plan for San Jose, Calif.-based Sagacent. The company could back up its data off-site, but it had no strategy to replace the business he brought in as its only salesperson.
"Hell, no. I wish to hell we did," said Correia of a formal plan. "We never thought about specific things that could happen. Luckily, we had pretty good people in good positions and they did their job. My office manager, Lisa, had been my right hand. Now the joke is she's my left hand."
Solution providers should assess each critical business function, according to the SBA, including the basic management of the business, serving clients, financial operations and IT functions. Solution providers should be able to determine how long they can withstand an interruption to those functions.
Having a strong business continuity plan, not just a technology continuity plan, is vital to any company's success, said Correia.
"It really caused me to re-evaluate my life and how I was running my company and what I was getting done," he said.
Correia currently doesn't have a life insurance policy, which would cost about $1,000 per month, or eight times the cost before his stroke, he said. For the same reason, Sagacent also doesn't have a "key man insurance" policy, which protects the business if a key executive dies or is incapacitated.
"[It's] much more than I can afford relative to the value or payout of the plan in the event of my death or incapacitation. Certainly this is an example of poor planning on my part. You want to have the insurance before you need it," he said.
What Correia can do -- and is doing -- is delegating more tasks and documenting procedures so there is not a single point of failure should an employee be out, Correia said. Creating a plan that provides backup for all business functions is something that all solution provider businesses should do, he said.
"As a small business, that's a bit of a challenge, but we can identify what everybody does and do lots of oversight on each employee's procedures and things they do and look for bottlenecks," he said.
No. 2: Review Your Insurance Coverage
Solution providers should review their insurance policies with qualified agents to make sure their coverage meets their needs. A key question solution providers need to ask, according to the SBA, is, "How much can I afford to lose?" Solution providers also should know the value of any property they own.
Of course, purchasing an insurance policy does not guarantee a safety net. Policies should be routinely adjusted and updated as the business, and employees, grow and evolve, said Dave Casey, co-founder and CEO of Westron Communications, a Frisco, Texas-based solution provider.
A few years ago, Westron's president and co-founder, Jack Higgs, died after a routine medical procedure. His death sent shockwaves through the company and Casey, then vice president of engineering, endured an 18-month legal battle with relatives of his longtime partner over insurance benefits and the valuation of the company. It cost Westron millions in revenue, Casey said.
When Westron was founded, Casey and Higgs had signed a buy-sell agreement funded with an insurance policy stating that if something happened to one partner, the other could buy out the first partner's shares with the insurance funds. The problem was that the agreement had figuratively been left in a drawer for 21 years and hadn't been updated as the business grew and times changed.
"We hadn't really reviewed it, and there were a couple of paragraphs that were not as clear as they should be," Casey said.
In particular, Westron's insurance agent wrote "buy-sell" on the document as the reason the policy was being issued. Those two words, legally vague, led the opposing attorney to challenge that the proceeds should go to the company and not to Casey to be used to buy Higgs' share in the company, Casey said.
"It could have been left blank. It probably would have been better if it was blank," Casey said. Although all parties signed the deal knowing the proceeds would go to the surviving individual, it was not clearly stated, he added.
"Be very careful how it's worded. The intention was to purchase back the stock to hire someone to replace that person's functionality," he said. "We did what a lot of folks do when they start a company that's not worth anything. We had a boilerplate buy-sell agreement. Everyone signs it, you put it in a drawer, and you're done."