The Pandemic forced upon us a re-evaluation of priorities as we watched the news and were prevented from socialising normally and visiting loved ones. Lockdown has led to a reappraisal of traditional work and commuting patterns which may have led to a number of permanent changes including where people wish to work and when to retire.
The commodity and energy price shocks are set to bring a wave of inflation such as we have not seen since the 80s. Brexit-induced factors have challenged businesses to consider supply chain robustness and be creative about finding labour resource. In short, after a long period of a relatively stable and benign financial environment with cheap finance and labour, things are going to get much less certain and businesses and individuals are going to feel the strain.
In such an environment, it pays to check your business is fit to undergo a period of difficulty and the unexpected. There are many things beyond our control, but that should not prevent planning for the future. Here are a couple of interesting scenarios which are not as uncommon as you may think.
An elderly and successful entrepreneur had neglected to consider the matter of succession and unfortunately died suddenly and unexpectedly. Throughout his life he had kept his business closely controlled. This caused a number of problems on his death. Firstly he was the only signatory on the bank mandate. Secondly, he was the sole director of the company. Rather than being a peaceful ending to a successful life, his death immediately triggered an existential business crisis with suppliers and employees due to be paid and the company potentially hamstrung in its capacity to respond.
Luckily at an early stage there was just sufficient time to assist the sole remaining officer (a company secretary) in taking urgent corrective action in the right order such that the bank was not obliged to freeze the account.
In this multi-generational Limited Liability Partnership (LLP) valuable business property was being held personally rather than in the partnership. While the business had its ups and downs, it was successful and well financed, allowing it to survive tough times and see off rivals.
Similar to the first scenario, this was another case of strong, close personal control. As the matriarch eventually grew old, the next generation began to manage the business. However, no thought was given to amending the bank mandate or considering who should be members of the LLP.
Sadly two generations died in close succession. For a while the business’s only member belonged to the third generation and matters were finely balanced. On this occasion we were able to assist the family, manage the Inheritance Tax and appoint new members under whose stewardship the business has strengthened with a clear exit strategy.
Even small businesses need a contingency plan (sometimes called a Business Continuity and Disaster Recovery Plan), in the event of unforeseen disaster. Many think of these in physical terms (fire, flood, security), financial (fraud) or technology (blackmail from ransomware). While few people want to think about becoming ill or dying unexpectedly, perhaps the top of the list should be the fundamental issue of management succession and bank administration.