5 Ds of Contingency Planning Add Value to Your Business and Your Exit Strategy / by

Contingency Planning is one of those areas most business owners would rather avoid and not think about at all. Who wants to think about worst case What-If scenarios? However, what if you were to develop your contingency plans to address the worst problem or tragedy AND DOCUMENT IT. What is the immediate impact? Those documented plans immediately add value to your business. They allow you to preserve and enhance the value of your business, add security, and streamline ongoing viability, in the face of major issues.

To build a successful business that can endure, along with growing the top line, you must also plan for and have contingencies laid out for all 5 Ds that can put the entire enterprise at risk. The 5 Ds are:

  • Death
  • Disability
  • Divorce
  • Departure
  • Disagreement


It’s unavoidable. Rather than deny it, think about the consequences to the business, your team, your stakeholders and your family. You can use a range of insurance products to mitigate the risks of your death while leading your organization. Establish who pays for the various insurance products, and who owns them early. But you must also think through how to structure your buy/sell agreement and who will run the business without you. How will the business continue? Have you written down the location for all major documents and contracts? Who knows where your passwords are stored or the lock box key or the safe combination?

In addition, it’s important to keep you and your business legally separate – separate legal entities. So this discussion may include both your corporate attorney, your estate attorney and your insurance broker at the core.


Before age 65, we are all more likely to need the benefits of disability insurance than life insurance. Long before you or your executive team might need to access it, define the parameters, protection and obligations of your company disability policy. Decide early what your company must cover for disability and who is eligible. You want to avoid a knee-jerk reaction to deciding between business survival and paying an ill or handicapped owner or executive.

Director & Officer insurance is critical to securing the future of the company if something untoward were to happen to you or other board members. It is expensive but not as expensive as losing both your company and your livelihood.

Be sure you establish an employee benefits program that will handle any founder’s death, disability or retirement – even if it appears likely not to happen for another 10 years.


The costs and risks associated with building a business are high. Marriages don’t always survive. But you don’t want the demise of your (or any founder or partner’s) marriage to destroy or handicap the business too. Divorce can also be a business partnership split, which feels like a marital divorce. It is best to define your policy on share ownership, value and votes in the bylaws from the outset.

Plan for who retains ownership in the case of a breakaway, and who gets bought out/paid off. Just like a pre-nuptial agreement, lay out a memorandum of understanding before you open your doors and bring in your first sale for each scenario.


Partners have different timelines in mind for moving on to the next venture or retiring. Where does the money come from to pay off the departing partner(s)? Who will do the work to ensure business continuity? How do fairly compensate or buy out a departing partner without handicapping the business to do so? How do you make a departure amicable or avoid contention? Do you have a partners’ contract of commitment, requirements, and constraints?

Planning for your transition to reinvention takes planning from the outset. Identify all partners/founders criteria and timelines early. Document the continuity plan for the business in the case of each one moving on.


Founders and Partners in a business are like spouses in a marriage. They don’t agree on everything, nor do they need to for the business to thrive. However, major unforeseen disagreements can cause rifts in the organization that may harm the company, team, even client relationships. Spelling out a policy and procedures early, before there’s an issue, to work through critical disagreements on such decisions as: reinvesting for growth or taking dividends, how to structure benefits or taxes, when to sell, which buyer option to pursue, etc.; provides expectations and structure to be able to address and resolve these issues effectively.

No one ever wants to face death, divorce, disability, departure or disagreement as a possible risk to their business when everything is going well. Contingency planning is about making strategic decisions for eventualities that may never happen, but if they do, you are prepared. You can’t buy a house or a car without insurance coverage. Developing a contingency plan for all 5 Ds takes time. Document each element as the policy is decided and executed. That’s how you can monetize the policy and reduce the risk to business continuity when faced with any of these 5 Ds.

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