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Joan M. Ridley
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Emergency Operating Plan
What is it and Do You Need One


Joan M. Ridley, CEPA, CBI, CFP™


Have you ever wondered who would immediately step in and run your company if you became unavailable for any reason? If you are wondering, then your employees, key people, customers, vendors, bankers, other shareholders, and family members probably are too.

Many business owners think or assume that provisions for who would run the company and how it would be run are included in their buy-sell agreement, or estate planning documents. However, that might not be the case. Before you decide whether or not you need an emergency operating plan (EOP), let’s take a look at what it is and is not.

An emergency operating plan is a document that informs your key people, employees, family, and professional advisors about who would run the company, and how job descriptions and duties of you’re your employees would change if you were to become unable to work for any reason. It addresses the operations of the business and not ownership. It is not a succession plan, nor is it a legal document.

The Tone

The document should be written in simple language with no legalize. It needs to be informal and in keeping with how you normally communicate. In fact, I recommend that you personally write a cover letter that shares your thoughts, and dare I say, feelings, about how you came to this point, the role the company has played in your life, and the contribution the employees have made to the company’s success.

Issues the EOP Addresses

Your business consultant knows what scenarios and issues need to be addressed if he or she has drafted a number of these documents. However, here are the basic provisions to include. If it includes only the following provisions, you and your business consultant have not thought through the various scenarios and ramifications to the extent that you need to:

  • Who will take over your duties if you cannot perform them for any reason
  • How long that person will be in charge
  • What you want to happen to the company if you do not return


Why a Business Consultant

The drafting of the EOP is appropriately the role of your business consultant who understands the daily operations of your business. He listens to you and guides you through the thought process. He has the expertise to understand work flow processes. A rare consultant also has a good basic understanding of both estate planning and business documents. He should read those documents and then draft your EOP so that it is not in conflict with their provisions. Your business consultant will interface with your estate planning and corporate attorney if necessary. However, since this document addresses the operations of your company, it is not within the attorney’s scope to draft the EOP. And even though employee retention is a part of the mix, and maybe ownership will eventually pass to a family member or employee(s), this is not about succession planning which is traditionally understood by your insurance agent or financial advisor. The EOP is all about the daily operations of the company, and is, as the name implies, an emergency plan.


So Do You Need an EOP

Like most business owners, you probably like to take charge and be in control of your situation. You are proud of what you have accomplished with your company and with the lifestyle you have created, and rightly so. The next step is to take charge and insure that your company’s enterprise value will be sustainable when you are not present, if only until ownership transition can be completed. Work with your business consultant to record, in a very professional way, how the company will operate in your absence. Put it in writing. This is your opportunity to take charge once more. You can always make changes as your thinking or circumstances evolve.


Joan M. Ridley is President of Business Wealth Solutions, a business consultancy that helps business owners maximize value.  She is a Certified Business Intermediary, Certified Business Exit Planner, and a Certified Financial Planner™.  In 2013 she received the first Excellence in Exit Planning Award conferred by the Exit Planning Institute for her pioneering contribution to this new discipline.  She s the Founder of the North Texas Chapter of The Exit Planning Institute.  Call 214-692-9192 and visit www.bwsllc.net.

Copyright 2014 Joan M. Ridley

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