Owning a successful small or medium-sized business is a wonderful thing, but even still, challenges are inevitable. Many such businesses go through periods of strife and strain, whether from disputes between owners over managerial decisions, discord among shareholders or partners over profit sharing, or disagreements on growth and succession strategies.

And then along comes a once-in-a-century, economy-crushing crisis that makes those day-to-day and year-to-year business problems seem like child’s play. The COVID-19 pandemic ruthlessly proved that many small and medium-sized businesses were not adequately prepared for such significant disruption. The same can be said for other recent economic crises. Remember the 2000 dot-com crash? The Great Recession of 2008?

Even more challenging than cyclical events is the untimely death or disability of a key owner.

If a small business is going to be built to last – and last at least until the next generation of owners takes the reins, and beyond – there are several key questions that current owners should ask themselves and then spend time finding the answer. Consider the following.

1. What’s it worth?

The first step in safeguarding your business is determining its true value. You need a thorough understanding of its worth in order to protect it and to make plans for it to grow and, if desired, continue on to the next owners. A stem-to-stern business valuation will determine that value and such an assessment should be done periodically.

Businesses evolve over time with new product lines or service offerings, more valuable assets, and new additions to the team with different skills. Market values change along with the business environment. Owners should take stock from time to time so that all decisions are rooted in the true value of the business. This periodic analysis should also include tax planning, particularly as gross sales (revenue) and net income grow.

2. Who’s next in line?

The common expression about the need to be prepared for risk is: “In case I get hit by a bus.” This could easily be updated for these pandemic times to the following: “In case I get COVID-19 and am laid up for months, or even worse, don’t survive.”

The sentiment, or cynical warning really, is the same. It’s important to prepare for a sudden loss of leadership. Can the business keep functioning smoothly? Is there a “number two” ready to take charge? Are other family members or key employees ready to step in and step up should a tragic accident or incapacitating illness occur?

With proper planning, an abrupt absence of leadership or permanent loss of a key figure in the business can go from an extinction event to a speed bump.

3. How solid is your team?

As mentioned above, small businesses can ensure business continuity by having trusted, competent employees in place to take the helm in times of crises. The key to keeping good people in place is to provide incentives, such as an employment contract with a non-qualified retirement plan that adds compensation beyond a salary and bonus. You can also establish shares of “phantom stock” that vest when the business is sold or over a set time to ensure that your loyal employees remain in place and get a financial benefit when new owners get the keys.

These arrangements build goodwill, foster loyalty, and protect both owners and family, which will end up being indispensable when the owners must navigate the business through choppy waters.

4. Are you insured?

Throughout life we take pains to insure ourselves, our homes, our cars, and even our pets. We add insurance when we rent a car or take a non-refundable vacation. The right amount of underwriting can ease the financial pain of any losses.

Small business owners should make sure they have disability insurance in place so that income will continue in the event of a temporary or permanent disability (see “bus” and “COVID” above). This insurance is critical for anyone, particularly those who are self-employed and rely only on themselves to generate income. It can also separately insure operating costs and fund buyout agreements.

Likewise, life insurance is important to fund such agreements and to help with estate balance (for those not inheriting a business interest) and taxes.

5. Is there cash on hand?

Many small businesses keep reinvesting and have insufficient funds in the bank to deploy in times of trouble. For example, the pandemic crisis brought swift doom to many eateries that struggled to pay rent and other overhead with closed or curtailed dining rooms.

Still, it’s possible to fund a reserve that can be drawn upon during a crisis. Six months of operating expense will get you through many crises. Another option is to secure a credit line – in advance, before it is needed – from a local bank or other trusted lender.

When you opened your business, nobody told you it was going to be easy. But with the right plans, contingencies and advisors, you can make it through the inevitable rough patches and find success and prosperity. And while you will work harder than ever before, you will never have a boss drop a file on your desk for handling at five minutes to five on a Friday, scotching your weekend plans.

Barry Koslow, JD, is the managing director of Secure Benefits Northeast, LLC, an employer benefits and business transition planning firm based near Boston. He can be reached at Andrew Koslow, MD, JD, is a consultant at Secure Benefits Northeast, LLC. He can be reached at

Business stock photo by Sergii Gnatiuk/Shutterstock