Business In Washington - Business Operations & Management Consulting

Hurricane Gustav has moved on, losing its category 3 punch along the way.  It was still a very bad storm.  And it is worth remembering that Katrina was a cat 3 when it hit New Orleans.  But this time it was a far lesser event, certainly not the huge disaster the media was predicting.  (Actually, they were left scrambling for disastrous news to report, resulting in some amusing over-dramatizations.)

What made this one different?  Well, there are certainly differences in the storm itself, but that’s not my expertise or my concern here.  I will leave that to scientists and meteorologists.

From my perspective, the difference here is primarily due to planning, before the disaster, and then following the plan.  So simple!  And yet so unlike the response to Katrina from all concerned.  Most of the blame after Katrina was heaped on the Federal Government, particularly FEMA and President Bush.  However, one should not forget the State and Local authorities, which careful analysis done after the event suggests were far more culpable.

Regardless of the level of blame, President Bush was certainly determined to do a better job in future emergencies.  The efforts at the Federal level certainly showed.  FEMA has new leadership and new plans.  Along with new leadership and new attitudes from old leadership at State and Local levels, as well as excellent coordination and cooperation, the real potential disaster simply didn’t happen.

There is a great article in the Wall Street Journal today on just this topic.  It offers kudos to new FEMA Chief R. David Paulison.  He earns them with his cool head in a crisis, leadership, and excellent planning efforts.  I recommend the article to my readers.  You will find it here: 

There are great lessons to be learned here, for businesses as well as governments.  With good leadership and planning, you may not be able to avoid disasters, but you can mitigate the negative effects!

Like most Washingtonians, we listened to the torrential rain hitting our roof hour after hour, periodically checking vulnerable areas of our property for rising waters.  For the second time in our memory, the intrepid Dennis dug trenches in the pouring rain at midnight, helping to channel water away from one of our doors.  He wasn’t able to avoid the flood completely, but his efforts did minimize it, containing the inside lake solely to the garage.

Also like fellow Washingtonians, we listened to the news.  Stories of loss, homes, belongings, the accumulation of a lifetime of memories, and in the worst case, loss of lives, were heartrending and touched us all.  We can all identify with our neighbors who lost so much and, as is common in this wonderful country we live in, individuals and organizations jumped in to help. 

As business owners, we were particularly touched by seeing the work of lifetimes spent building successful businesses wiped out in minutes.  A mudslide inundating a popular restaurant.  Stores with carpets now brown with slimy silt and stock ruined.  Grocery stores with fresh and frozen inventory ruined by power outages.  Third generation family dairy farms with their herds wiped out.  Somehow, this story was the hardest to hear and see.  These aren’t just cows!  They are the living core of a business, generating a living for the farmers and food for all of the rest of us. 

How do you bounce back from this?  As business consultants, how would we advise our clients in the face of losses this great?  Every business is different, but there is a basic core of business principles that cross the lines between industries and types of businesses.  We believe the initial focus should be on gathering information and possible sources of assistance and making a plan to move forward.  Then take action.  Each small step will help heal the soul as the work begins to heal and rebuild the business.

Here are some initial steps to consider.

Talk to your advisory team.  Every small business owner should have an advisory team consisting of at least a CPA, business attorney, business consultant or advisor, banker and commercial insurance agent.  This is the time to tap that resource for support and guidance.  In this case, start with the insurance agent.  He/she can advise you on your coverage and how to report the loss.  Your business consultant can help with ideas, contacts, and the wisdom of prior experience.  A consultant can also provide guidance and focus at a difficult time.  Your attorney can provide similar guidance, but with a focus on the potential legal issues. 

Document, document, document.  It is tempting to dive in and start cleaning, but it is critical to document the loss first.  Take pictures.  Take videos.  Make detailed lists of equipment, inventory and other items lost.

Read the small print in your insurance policy.  It is best to do this when you get the insurance in the first place, but many of us don’t do it or, if we do, we don’t remember the details.  You need those details now to find out just how much of your loss is covered.  Most policies don’t cover floods unless you have obtained separate flood insurance from the government.

Is your loss the result of a natural disaster or someone else’s act or negligence?  Although too many in our current litigious society think lawsuit first, it is still something that may be appropriate in some circumstances.  Consult your attorney.

Consider a temporary location.  Is it possible for your business to get started sooner in alternate quarters and operate at a level sufficient to begin generating dollars?  If so, start planning for that.  Talk to a commercial real estate agent.  Make lists of equipment and supplies required.

Determine what funds will be required to get back in operation.  Know how much you need.  Then determine potential sources and go after them.

Apply for State or Federal emergency grants or loans.  Disaster declarations free up public funds to help those who face serious losses.  This may take a while, but find out what the process is.  If you are still feeling overwhelmed (and who wouldn’t be), get some help.  Again, tap your advisors.  They may be able to help handle this task, taking it off your shoulders.  However, don’t wait and don’t rely solely on state or federal aid.  It is a wonderful thing that our government does, helping citizens who have suffered so much loss.  But remember that the strength of this country is the strength, ingenuity and self reliance of its citizens.

Be open to receiving help.  There are many sources of help available to you, both personal and professional.  Use them!  Your neighbors outside of the immediate disaster area just need to know what to do and how best to help.  There are many business professionals touched by what we have seen who want to lend a hand.  But you need to ask.  Since networking is the lifeblood of those of us who work in advisory roles, if we can’t provide the exact help needed, we probably know someone else who can.

Put a recovery plan in place and begin executing the plan.  If you establish goals for your business recovery and organize the big tasks ahead, you stand a much better chance of success.

Look forward, not back.  Regret, loss, grief, worry – all these are tough to deal with and can weigh you down and hold you back.  Learn from any past errors and make changes to avoid repeating them, but don’t dwell on them unnecessarily.  Look forward.  Rebuilding is a positive thing.  Believe us when we say, all of us in the business community are cheering for you and stand ready to lend a hand.

Have you checked your fire extinguishers lately?  Are they damaged, fully charged (check those gauges!), etc.?  Most of us pay attention to things like this, particularly those of us who lean toward the anal retentive when it comes to preparedness.

Have you done the same for your business?  Huh? What am I talking about?

I am talking about succession planning.  Have you done any?

Normally, when I ask my clients this question, the answer is no.  Nothing’s been done.  In fact, they haven’t even thought about it.  In general, many are convinced they will be here forever.

The Reality – there’s a Mack truck out there for each of us.  We just don’t know when or where. 

So my business tip of the day is this:  Think about it.  Then take action.

Succession planning can be viewed in the context of two scenarios.

• Scenario 1:  Who will take over business when I want to retire or pursue other interests?

• Scenario 2:  How does the company run (i.e. survive) if something sudden happens to me?  Or to a key employee?  Here, I am referring to the Triple D threat - death, disability, and divorce, any of which can and will impact the continuity of a business, usually severely.

Statistics say we are more likely to encounter a temporary disabling event (skiing accident, surgery, etc.) than something permanent – like death.  However, don’t make the mistake of thinking that a temporary disability is just like taking a couple of sick days.  What if you are battling cancer and can’t work for 6 months?  Better to be prepared.  Have a clearly thought out, formal plan.

The primary difference in handling our 2 scenarios is the time you have for planning.  Scenario 1 is, by definition, a planned event.  It’s also happier to contemplate, so people are more likely to tackle the planning effort.  Scenario 2 is easier to ignore, but do so at your peril.  Don’t assume everything will keep going effortlessly while you are in traction after that skiing accident and on too many painkillers to think.

Why should you care about succession planning?  Well, if you are considering Scenario 1, you want to get the full value out of the business you created.  After all, it’s your baby.

When considering Scenario 2, company value still plays, but you also have to consider company continuity.  If you are not there, who will run the company, keep it going, maintain the value, maintain the income stream for your family and jobs for your employee family?  Along with selfish concerns, i.e. for one’s own family, you have a moral and ethical duty to think of your employees.  They count on their jobs in your company for their livelihoods and the welfare of their families just as you do.

So, how do you get started?

First, decide to do it.  Commit to developing formal succession plans.

1. Think through your options very carefully.  Who could take over for you, either temporarily or permanently?  A family member?  Key employee?  What information would they need to step in quickly and effectively?
2. Get your advisors involved.  A skilled business consultant can help you with your planning.  Bank on their experience.  They have most likely done this before and can guide you through the planning process. 
3. Formalize your plan.  Document it.  Run it by your attorney.
4. Inform the key employee, the one you designate as the person to take over.  In fact, get them involved in developing the plans and procedures.
5. Periodically, review the plan and update it, particularly if that key employee leaves.

Finally, take great satisfaction in being prepared.  And avoid those Mack trucks!