Covid-19 has highlighted the importance of developing long-term business, financial and legal strategies that can provide a plan of action for even the most unprecedented times. Some businesses might be looking to fortify their plans for Covid-19, while others might be struggling to develop them.
Regardless of where you are, this article offers six key tips for business, financial and legal planning during Covid-19 that can help keep your business on track.
1. Have a team in place.
As a partner at a law firm, I believe one of the most important things a business can do is consult with its financial and legal team. An ideal team includes legal counsel, a financial advisor, an accountant and a payroll expert. If you do not already have a team in place, now is the time to assemble one. Reach out to your business partners and contacts to learn who they turn to in difficult times.
Your team can consolidate, organize and manage planning documents, including employment, operating and shareholder agreements. They can also help quickly review commercial leases and discuss options for buying and selling corporate real estate. Most importantly, having this team in place allows businesses to know who to contact and thus receive quick assistance during times of sudden crisis.
2. Be confident in your planning ability.
When the worst happens, it’s easy to go into “panic” mode. This is when documents get lost, employees and stakeholders get nervous, and protocols get broken. Now is the time to practice open and transparent communication with your team so that questions and confusion can be clarified.
Having confidence in yourself and in your team boosts company morale and will increase your chances of achieving positive results. When confidence is projected and transparency is practiced, sloppy mistakes can be avoided.
3. Build up your reserves.
Cash is king. Building up reserves allows businesses the flexibility to respond to an acute or ongoing crisis. No one could have predicted that many restaurants would only be permitted to serve outdoors this summer, for example. But by building up reserves, restaurants and other impacted businesses can be better prepared for any unpredictable developments.
4. Know what you need to survive.
The best time to calculate your lowest possible operating costs is before a crisis. Let’s face it though: Many businesses just don’t have those numbers on hand. Therefore, a critical part of financial planning for Covid-19 (or any other crisis) is to be able to say what exactly you need for your business to survive. A worst-case-scenario plan can be better developed and executed once you have specified your exact goals and needs.
5. Fortify your worst-case-scenario plan.
Most businesses have a worst-case-scenario plan. There are certain actions that must be taken to fortify this plan, however, that can be easily forgotten about between the time it’s discussed and the appearance of a crisis. If you have not done so already, review this plan and get all the necessary documents and signatures in order before the worst-case scenario comes up.
What are these documents?
Businesses will need to either create or review a buy-sell agreement; this is a living document that details what should be done in the case of an owner or partner wanting to sell the business. It also offers guidelines for what to do if such a person should fall ill, become disabled or pass away. Is there insurance that covers the business should these events come to pass? How are your bank accounts set up? How are the titles for those accounts currently drafted? If the bank accounts become frozen for some reason, do you have a backup or contingency plan? If the business has a safety deposit box, are there multiple people who can access it?
There is no better time to play the “what-if” game than when preparing a worst-case-scenario plan.
6. Revise your exit plans.
This last tip is connected to No. 5 but deserves its own discussion. When it comes to planning for a business owner’s eventual retirement or exit, it’s important to look ahead. Consider how you are going to value the business when this occurs. Do your exit packages need revising because of Covid-19? How can you ensure that business partners are protected in their investments? What if you end up wanting to sell, but you can’t get the price you want? Have you built up other assets and taken actions to protect against financial loss? Ask these questions, and develop a plan to change any undesirable answers.
By following these tips, you can be more confident in your business decisions and better prepared for current and future crises. Now is the time to learn from this experience and prepare for the future.