If you’re an entrepreneur that wants to pass your company down to the next generation, you want to do everything that you can to make sure that your successor does well. Beyond knowledge of the services and products that your company sells, knowing how your company operates, especially in the areas of administration and finance, will help them continue to grow your business. In our last article, we talked about the basic functions of a CFO – Accounting and Finance. But there are other key areas of business operation that usually fall under the purview of the CFO as well – IT, Human Resources, Legal and Risk Management.
- IT – We all use computers, but you need to give your successor the knowledge to make solid decisions that favorably impact your bottom line.
- Hardware – Everyone loves powerful computers, but not everyone needs a high -powered graphics oriented “gamer” laptop. Save the money. The difference might be $700 – $1,000 per laptop.
- In-house or outsourced – It’s going to be more cost effective to hire an outsourced IT firm to manage your computer network, than do it yourself. Teach them the value of outside resources. Buying the expertise you need on a part-time basis brings money to the bottom line.
- Local or Cloud based – There are many reasons why so many companies are going to the cloud. Security is just one of them. You don’t need to have a room with servers, when you can connect to a shared resource no matter where you are.
- Human Resources – As you know, running a company is many times knowing what NOT to do, especially when it comes to the issue of dealing with people. This has become a more complex area, and your successor needs to understand critical HR skills.
- Delegation – Learn to get work done through others. This is likely the hardest early management task to conquer. It’s easier to do it yourself, but it also limits how much you can do to grow your business.
- Show them that the best reward for your employees is an “attaboy”. Everyone wants more money, but employees stay longer and are more engaged when they are appreciated.
- Legal ramifications – From the I-9 form to unemployment, understanding the basics of HR laws will keep your company out of trouble with the state and federal government, and lower your insurance costs.
- Performance reviews – Employees work better when they know where they stand. Regular reviews, even done quarterly, will make sure your staff knows what they’re doing right and what they need to improve.
- Record keeping – The privacy issues relating to employee practices can be a headache. You need to easily access and provide information to your employees when they need it. Plus, it’s a legal requirement.
- Legal – Every company has a lawyer. But assure that your successor understands the intent of contract terms, and leave the exact wording and technical aspects of your contractual relationships to your attorney.
- Be sure that they understand your contracts, with your customers, your suppliers, your bank, your employees, and your landlord. If there’s one important thing you should teach your successor – “Read the complete document before you sign anything.” Seriously. That 125-page contract from the bank? Make sure that they read and understand the whole thing. You have to live or die by their terms.
- Teach them your company policy on what to do if the other party breaks the contract. Would you sue, negotiate a settlement, or walk away? They need to understand the costs and risks of forcing performance.
- Intellectual Property – They should understand whether your company has a trademark on its company name and logo. Also, if you’re developing new product, understand the timetable for filing with the USPTO – United States Patent and Trade Office, and work with a patent attorney. Know what patents and trademarks you own.
- Risk Management – Your company has insurance. Introduce them to your broker, the types of policies that you have, and the last time your policies and their limits were reviewed. They should understand the primary policies that your company has.
- GL – General Liability – Know what your policies cover, and what are the exceptions are. Those exceptions are key. Understand what is excluded.
- Product Liability – If you sell a product, they need to understand the limits. This is your protection in case someone gets hurt using your product. You might think, yes, but nobody would do that with our products. Oh, yes they will. That can be an unpleasant surprise!!
- Professional Liability – If you provide a service, rather than selling a product, you must have this coverage.
- EPLI – Employer Practices Liability Insurance – This protects you against your company forgetting to do something (or doing something that you shouldn’t have done) against an employee. This includes discrimination, sexual harassment, failure to provide health insurance, telling employees that they have certain benefits when they don’t; the list goes on and on.
- D&O – Directors and Officers Liability Insurance – Whether you buy the insurance, or just indemnify your officers and directors, you need to understand your liability.
There are a lot of things to learn about business before you’re ready to run one. When you started your company, it took you years to understand all of the pieces. Don’t think that your successor will learn this all in a few weeks. Planning for that transition gives you the time to teach them what you learned over the 20 – 30 years you were in charge. Start doing that TODAY!
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