Business Owner's Planning for Personal Catastrophe

Business Owner’s Planning for Personal Catastrophe

Business Owner's Planning for Personal CatastropheYou can’t know in advance when a personal catastrophe—serious illness or accident to you or a close family member, a divorce, or a death in the family—will strike. All you can do as a business owner is be prepared to handle personal issues when such catastrophe occurs without impacting your business.

The month of September is National Preparedness Month where business owners are advised to plan for catastrophic events, like storms, fires, and prolonged power outages, that can temporarily put them out of operation. So, too, should business owners plan, or at least think about, what they will do if something serious on the personal side happens and how this could impact the business.

Short-term planning

Know in advance what immediate response you’ll take in a crisis. Usually, this entails rescheduling business appointments, meetings, and other activities. It’s my belief that owners should share as little as possible about the personal reasons for rescheduling; just do it. I’m sure others disagree and think that people are understanding about the need to reschedule after a personal crisis. Your call on whether you feel comfortable sharing personal information with employees, customers, vendors, and other business associates.

Of course, not all business matters can be rescheduled. Say you’re the keynote speaker at a conference or doing a project involving many parties that must be completed by a certain date to meet financial requirements. These projects or deadlines must be met for the business to continue, or at least retain its good reputation. In these situations, a business owner must find a way to meet these obligations.

Long-term planning

It’s only realistic to expect that a business owner will experience some catastrophic event that will prevent him or her from being active in the business for a period of time. This may be days, weeks, or longer. Review your business policies and practices now to be sure that operations can continue in your absence.

  • Be sure there is a person who can temporarily step into your shoes. Grooming someone in advance to do this can also be helpful even if you don’t experience a personal catastrophe. Doing this can enable you to take a vacation from time to time.
  • Build a financial cushion if business revenue depends largely on your personal performance so you can pay bills during the period of a personal crisis. If you don’t set money aside, be sure to explore now your borrowing options in the future, such as lines of credit and, as a last resort, loans from your 401(k) plan (if the plan allows for borrowing).
  • Review insurance coverage, such as disability insurance. If you experience a long-term disability that prevents you from working at the same level as currently in your business, disability insurance can pay you a monthly income. As a business owner, you may or may not be covered by workers’ compensation, and even if covered, this insurance only kicks in if you have a work-related injury or illness. Do not expect Social Security disability payments to be a meaningful substitute for your current business income. Learn more about long-term disability coverage at NAIC.org. Check your trade associations and chambers of commerce for access to lower cost coverage than you could obtain on your own.

Final thought

When you do experience a personal catastrophe, keep in mind you don’t have to go through it alone. Seek expert advice—medical, legal, spiritual—to help you address the issues you face. And remember, as Robert Schuller said:

“Tough times never last, but tough people do.”

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