As you prepare for an eventual exit from your business, there are several threats to business value that you need to be aware of:
- Key employees leaving the company and taking customers, employees, and/or trade secrets.
- Key employees suddenly leaving without a replacement.
- Data security breaches.
- Uninsured casualty loss.
- Fraud and embezzlement.
- Losses from high-risk operations.
- Any number of other economic, industry, or internal threats.
How Minimizing Business Risk Solves Problems
Minimizing business risk can position you to solve three problems.
1. Harm to Transferable Value
A vital part of increasing transferable value is making yourself inconsequential. As key employees take the reins to grow the company, they begin to manage and develop their own relationships with key customers, employees, and vendors. Make sure to have strong incentive plans and noncompete contracts in place to protect these critical relationships.
2. Data Security Breaches
Data security breaches can destroy customer trust, especially when sensitive information is stolen. Without customer trust, the business value may plummet, making an ownership transfer unbearably difficult. Minimizing this risk maintains the trust customers have in the company, thereby protecting the business value from outside threats.
3. The Cost of Protecting Your Business
The third problem is one that owners often create themselves: Because they aren’t willing to pay the upfront costs to protect their businesses, they end up paying much more later to resolve problems that they could have prevented at the outset.
Ignoring business risks can be devastatingly expensive compared to addressing them early on. Hiring experienced advisors to help identify and address business risks preserves and protects hard-earned business value, making a successful exit much more achievable than simply hoping nothing bad happens.
If minimizing business risk is an area in which you haven’t yet focused your attention, contact us today. We can help identify and begin to address threats to your business value.
The majority of this content is published by Business Enterprise Institute, Inc., and presented to you by our firm. Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.