Take Steps Now to Avoid These Eight Common Business Problems

By John Mahaffey, CPA, CVA

Senior Manager at Gorfine, Schiller & Gardyn, P.A.

When the economy is uncertain, you must be extra careful to avoid the types of disasters that could ultimately lead to your company’s demise. Fortunately, some advance planning may prevent or alleviate severe problems. Here are eight common scenarios facing owners and managers of small to mid-sized businesses.

1. A natural disaster damages the premises.

Of course, you can’t control the weather or other unforeseen circumstances. But damage to a business building caused by a natural disaster could temporarily shut down the operation. It can even ultimately put you out of business. Make sure that you have adequate insurance and that valuable business data is stored at a secure site.

2. A key employee joins a competitor.

There is always the risk that one of your top employees will switch jobs. However, this can be especially troublesome if the employee goes to work for your main competitor. Avoid this possibility by having key employees sign non-compete agreements. Typically, such an agreement will prohibit an employee from working for a competitor for a certain period.

3. An employee embezzles company funds.

All too often, business owners are swindled by seemingly trustworthy employees. Don’t think you are immune. To safeguard your assets, pay close attention to monetary transactions. Divide responsibilities so that one person doesn’t have complete control over the books. Set up a system of “checks and balances.”

4. You lose your biggest customer.

Invariably, one of your main customers will choose to do business elsewhere or will no longer need your products or services. Don’t put yourself in a position of depending on just one or two accounts. Take steps now to diversify the business to protect against a severe downturn in cash flow.

5. You become disabled.

If your services are integral to the company’s success, your fortunes will likely suffer should you ever become disabled. Consider taking out “key-person” insurance that can provide funding until you’re back on the job or the necessary provisions are made. Such a policy may also cover several employees who are vital to the operation.

6. Your company or partnership splits up.

Even relatives and the best of friends should develop contingency plans for a business break-up. The sale of a party’s interest, including a forced sale upon the death of one of the shareholders or partners, may be addressed in a buy-sell agreement. This document establishes the terms of the buy-out and sets a value for the respective business interests.

7. Your computer system crashes.

If your business is like most, it relies heavily on technology to run more efficiently. You can well imagine the repercussions if your computer system fails or it is damaged by a virus or hackers. Have a plan that provides optimal security and creates regular back-ups.

8. The company founder dies or retires.

Who will assume the leadership mantle in the event the founder suddenly passes away or opts to retire? Draw up a succession plan tailored to your specific business and personal needs.

For assistance with these or any of your business concerns, give John Mahaffey, CPA, CVA a call at (410) 517-6804.

BIO

Gorfine, Schiller & Gardyn, P.A. is a full-service certified public accounting firm located in Owings Mills and Hagerstown, MD. We offer a wide range of accounting and business consulting services including audit, tax, mergers and acquisitions, due diligence, business and investment analysis, estate and trust planning, emerging business, fraud prevention and detection, business valuation and litigation support, employee benefit plans, and technology consulting.