Are You Prepared For Your Business?

While you can never have 100% of the details and permutations worked out ahead of time you can have a framework available for dealing with crisis events, a plan for the essential business functions, and contractual arrangements in place for critical requirements for your business, at the very least.

When most people think of Business Continuity Planning1, they consider that if their Information Technology Department has a plan for disaster recovery then they have addressed business continuity. While for many businesses these days IT plays an essential role in supporting the business, your business’ actual requirements for continuity are usually much more than just IT.

The recent events in April and May 2010 in Bangkok meant that many businesses, their staff, their customers and the general public experienced disruptions which many had not experienced before.

In reality, only certain physical locations of Bangkok were directly affected, while the vast majority of people in the rest of Bangkok and the country tried to continue with their lives and businesses. However, many found that as Silom and Sathorn were directly affected some businesses in those areas virtually shut down for a 2-3 week period, with some for longer than this. As the business district, the affects of the disruption on these businesses were felt much wider.

For example, one of the smaller retail bank’s head office is in the one of the areas most affected by the events of April/May and for security reasons the physical access to the building was very restricted. This meant that their staff could not get access to their office and documents. While the bank’s branch IT systems were operating, some business functions such as loans were adversely affected. I am aware of a couple who had to put their house sale on hold for 2 weeks as the loan officer of this retail bank could not get access to the loan documentation he needed in the head office. The purchaser and the purchaser’s bank were not affected and were ready to go ahead with the sale and purchase. The delay ended up costing the couple 2 weeks extra in interest because the bank could not complete the transaction on time. The couple is bitter about this bank’s lack of business continuity planning regarding access to the head office and the bank’s total disregard of the couple’s position by charging them interest on the loan for that period, while clearly it was the bank at fault.

So in this example, the bank’s IT systems were not affected but the inability to gain physical access to the office and a hard copy of documents meant that certain business functions could not continue. When you undertake a business continuity planning project, the business needs to identify the essential business functions and the period of time before a disruption has a detrimental affect on the business. Usually this high level discussion takes place with the stakeholders and senior executives, who are more aware of the impact of certain consequences, such bad publicity, public embarrassment, lack of communication or no clear communication, legal or regulatory compliance default, etc. Generally these consequences are sometimes hard to quantify into monetary terms but can have a greater effect on the business and its reputation.

In my experience, businesses do not clearly identify their essential business functions, then walkthrough these functions to determine what the requirements to support them are. This is mainly because this takes time and requires very busy senior executives to be involved in the discussions and decision making process. Many businesses are looking for a quick fix to their business continuity issues. The more diverse your business or complex your functions interactions with other parties (i.e. internal and external to the organisation), the more time the business should spent contemplating the business impact analysis2 (BIA) before putting a plan in place.

A number of people have suggested a business continuity plan is like insurance. If you have it, it gives you peace of mind. But you do not really need to use it until you have a crisis and by then it is too late. And if you need to use the plan, it better be up to date and achieve what you want, otherwise it will give you false hope.

I have seen businesses copy another business continuity plan and basically only change the cover, or buy a software application tool which takes a couple hours to produce a business continuity plan. In both of these cases, the plan did not bear close scrutiny from an experienced business continuity professional but were superficial in appearance to get a “tick” from the auditors. However, generally the auditors these days will also ask, “when was the last time you properly tested your business continuity plan?” But the key point is the plan would not have achieved what the business required in a crisis and the impact to the business would not have been minimised.

So a few of my suggestions are:

- to make sure you have a business continuity plan which has been based on a recent business impact analysis

- to check when the last time your business continuity plan was updated. Most plans need some revision each year and should take into account any significant changes in the business, organisational structure, systems, customer services, etc

- to ensure that you have a copy of the business continuity plan in an offsite location should you be unable to enter your primary office location

- to ask when was the last time the business continuity plan or parts of it, such as the disaster recovery plan (DRP3), tested. There should be testing performed at least each year as this helps

familiarise your staff with what is needed to be done and what to expect, and generally also identifies changes that need to be made to the plan which tend to go otherwise unnoticed

- to check whether your plan is comprehensive enough. Most business continuity plans are made up of several plans or sections. For example, you will usually have a plan for crisis management, and health and safety, i.e. dealing with an event, how to assess the crisis, who should be involved, and how to make sure everyone is accounted for and safe. Out of a crisis assessment, it may be decided to invoke the business continuity plan, such as moving to an alterative business location. – An example of this, was that one of my clients had a call centre in a building. An office two floors above had a fire and everyone was evacuated from the building. An immediate crisis assessment determined that it was going to take most of the day for the fire department to extinguish the fire and declare the building safe to reoccupy. Also given the location of the fire, the fire department mentioned potential water damage to the offices of floors directly below. So they determined very quickly to invoke their business continuity plan which included rerouting incoming customer calls to the alternative switch board and sending essential staff to the alternative office location. All other staff were asked to go home and work from home, if required. All key performance indicators (KPIs) for the business were still met. Fortunately the water damage was not that extensive and they were back in the primary location by the end of the following day.

- if you really want peace of mind, then you should ask an experienced business continuity professional to review your business and business continuity plan. It generally takes a third party who is experienced enough to ask the key questions and identify the shortfalls in your plan.

Are you feeling confident that you are prepared? Or should you take some action to prepare before a crisis event?

Legend

1. Business continuity plan or BCP is usually a set of plans which as a minimum address the business requirements for essential business functions in a crisis or disaster situation and the recovery of the functions back to business as usual. The objective being that if the business continues to operate its essential business functions for a definite period under a BCP the impact on the business is minimised and any effects will be tolerable.

2. Business impact analysis (BIA) or sometimes referred to as a business impact assessment, is the exercise of determining how much “pain” or adverse impact can the business sustain and for what period of time; what are the essential business functions; what are the requirements of the essential business functions to keep operating; and when does the business need to be back to operating as business as usual.

3. Disaster recovery plan or DRP is usually a term used for the plan for dealing with a disaster and recovery of IT systems and services. The plan is usually very comprehensive, such as addressing the method of backup and the offsite storage of backup electronic files; storage of key hard copy documents; the recovery of operating systems and supporting software, application software, and data; and covering contractual arrangements, hardware, network and communications, people, support services and secondary operating site (if applicable).

Small Enterprise Tax Recommendations to Help You Prevent Business Tax Debt

You will need to fully understand some crucial small business tax guidelines if you would like to avoid business tax debt. IRS business help is common because it truly is actually difficult to eliminate business tax debt when working by yourself. IRS business assistance comes from many suppliers, from an accounting firm and bookkeepers to tax law firms and tax assistance agencies or qualified personnel. If you want to avoid business debt, take a cue from the subsequent small business tax hints.

Ready to start your own company? You must read up on your tax responsibilities and consider small enterprise tax guidelines to prevent business tax debt before a person does anything different. Problems with the internal revenue service will easily ruin your small business. Below, we discuss just a handful of pieces of IRS business help a aspiring businessman should follow to avoid tax issues.

Internal Revenue Service Business Help Step 1: Decide on Your Business Type

The type of tax forms you are going to work with might be decided by the business type you opt for. The most common business types

  • Partnership
  • LLC
  • S Corporation
  • Corporation
  • Sole Proprietorship

Internal Revenue Service Business Guidance Step 2: Your Business Tax Type

The business type you decide on additionally can determine the taxes you will come across and the ways in which you are likely to pay them. 4 common business tax types are:

  • Income Tax
  • Self-Employment Tax
  • Employment Tax
  • Excise Tax

IRS Business Support Step 3: Acquire Your Identification Number

An Employer Identification Number or EIN is utilized to locate your business. You can fill out an application for an EIN on the internet on the IRS website.

Internal Revenue Service Business Help Step 4: Keep Records

With few exceptions, you are not required legally to maintain information for the business. This can be described as a worked out move on the IRS’ behalf, as keeping complete reports can be an just about likely method for stopping IRS challenges later in your operation! Records you would be smart to keep differ from business type to business type, however, many common things to keep tabs on include all receipts, expenses, invoices and income.

You may retain records manually or with accounting software programs. If this seems intimidating, you may want to investigate hiring a certified public accountant.

Internal Revenue Service Business Guide Step 5: Which Accounting Way Should You Use

You are required to, being a business, record income and costs in the course of the entire year to the Internal Revenue Service. A consistent accounting method should be decided on. The two most generally used systems are the Cash Method and Accrual Method. With a Cash Method, you commonly report cash flow in the tax year it’s received and subtract expenditures in the tax year they are paid. Utilizing the Accrual Approach, you often report revenue in the tax year it is earned and deduct expenses in the tax year you incur them.

IRS Business Assistance Step six: Deciding Among a Calendar or Financial Year

Every single business owner has got to figure their own taxable income every single “Tax Year,” which is the annual accounting period of your business. The fiscal year and the calendar year are the most common tax years utilized.

You’re not required by the Internal Revenue Service to take any training so that they can run small businesses. You really don’t need to comprehend anything pertaining to your tax expenses to get your Employer Identification Number. This is why most new businesses are in massive trouble with the Internal Revenue Service. Listed are strategies you can use to educate yourself and avoid issues before they happen.

Seek Experienced Internal Revenue Service Business Help to Avoid Business Debt

Get the assistance of a Tax Resolution Company or Tax Attorney and get your IRS Debt Problems behind you. Seek Internal Revenue Service Business Help from a Professional now if it’s already too late to Avoid Business Tax Debt.

Down Markets and Business Growth Walls

It’s tough to build a business in a down market, and to grow past certain business size ‘walls,’

How can business owners best operate in a down market?

Business owners looking to sell their business need to pay attention to the markets. That seems to be a pretty obvious thing and maybe even a trite statement.

We’re working with one business which is down 20 percent, who had an offer on the table in December, and would have closed then based on trailing 12 months and forgetting the 20 percent down.

She thinks the business internally is just worth more than that and she’s decided to hold out.

The fact is her trailing 12 months is going to continue to trail down. She’s in an industry where it’s affected by the economy; a good part of it is discretionary. She probably turned down the highest price she’s going to see on that business at least in the next several years.

Regarding operating a business, it’s easy to say plan ahead, that’s obviously the advice in a nutshell, but what does that mean? It means conservative financing of the business.

The bankruptcy numbers are disproportionately high now due to those businesses that use leverage to buy a business or manage to borrow more money in the course of operating the business.

When the margins squeeze, when the business revenue cuts down 30 or 40 percent, all of a sudden you can’t service the debt.

So it’s conservative business standards, and for most business owners we don’t have to tell them that. Small and middle market business owners don’t like that trip to the bank. They only go there when they have to. They’re guarding against the excessive capitalization of the business, excessive debt in the business.

The debt in most businesses exceeds the equity. There’s nothing wrong with that, that’s normal, but it depends on how much it exceeds the equity.

Let me translate that to the equity in the private business. In small and middle market private business, family and friends was the traditional thing.

In the last up cycle, private equity groups became a dominant player. I’m pretty confident that private equity groups this year own about 48 percent of the capitalization of the mid market. And by mid market, I’m not talking about the public mid market, that’s a sliver of companies.

I’ve studied businesses with revenue greater than $5 million but less than $500 million. If you were to capitalize that whole market, private equity groups rather than individuals will now own about 48 percent of that market. It’s a very different market than it was six or eight years ago.

Speaking of market walls or business growth walls. Does this to mean that there are barriers to companies reaching certain sizes.

In the mid market, businesses with revenue $5 million to $500 million, there are only about 350,000 of those in this country, 350,000 out of 27 million businesses.

Let me rephrase that in another way. There are 27 million businesses in the United States currently. Only 350,000 of those have revenue more than $5 million. That’s a huge wall, getting over the $5 million dollar mark.

So 97 percent of the businesses in the United States have less than $5 million in revenue. I think that’s prima facie evidence that walls to growth exist.

I also break the middle market into lower middle, mid middle and upper middle. If I broke it, for example, at $10 million rather than $5 million, 125,000 of those businesses would be all that remains.

So we look at revenue greater than $10 million, 125,000 businesses in this country. That wall between lower middle and mid middle is very steep. And, again, the wall from mid middle up to the upper, and the upper middle market, there’s only about 12,000 companies.

Some of us overcome these walls but the odds are very much against us.