At this time of year, many of us adopt New Year Resolutions designed to lose weight, get healthier and otherwise become a better person. However, if you are a business owner, don’t stop there! This time of the year also provides an excellent opportunity to review your contracts, business practices and policies and other operational issues. A little time now can save a lot of time, money and effort in the future. So what should you be asking yourself? Here are a couple of suggestions:
What has caused you problems in the past? Ever hear the phrase that the greatest predictor of future behavior is past behavior or performance? It is often true. So, review what caused your business problems in the past, as they may repeat themselves. If you had employee issues regarding leave and time off policies, as many companies did with the Covid 19 pandemic and the increased use of remote work environments, you should start by reviewing your employee handbooks to make necessary revisions to your policies and procedures to protect your company in this new work culture.
What present challenges is your business dealing with? The business landscape is changing faster than ever before. How is this affecting your business? While current strategies may be been warranted over the past couple of years, they may be completely different today. This may require you to change your direction. For instance, increasing interest rates have slowed merger and acquisition activity and resulted in lower purchase prices in offers. As a result, many companies are focusing on continuing business as a going concern at least until the environment changes. This time does not need to be wasted, as it can be used to clean up your balance sheet and legal documents.
What is the future of your business? In this volatile time, you should be asking what is the outlook for your industry. Just a short time ago, companies like Blockbuster Video and Borders Books were highly profitable businesses and didn’t see a need to change their business model. The results were devastating. If the future of your industry requires you to pivot your business model, you need to be pro-active. Further, such change may provide you an opportunity to restructure your business. Financing new business ventures with debt, while giving equity to younger generations, is a business succession opportunity that is only available when starting new business venture.
Do you have any new customers/suppliers? Most businesses have experienced customer and supplier issues over the last couple of years. These issues were stressful and caused a great deal of work by management to add new customers and suppliers as a safeguard if economic conditions again become restrictive. Likewise, if you have added customers or suppliers, now may be a good time to review your terms and conditions with such business relations. Some terms and conditions can be very burdensome and cause major problems when problems arise. The early stages of a relationship provide an opportunity to implement, or even revise, these terms and conditions. Also, key to reviewing your terms and conditions is analyzing how you implement them. Do you have an employee who includes them with your purchase order and quotation e-mails? If not, you need to put procedures in place to do so.
Do Your Contracts have Renewals? The beginning of the year provides a great opportunity to review your contracts and determine if there are renewal or non-renewal notices required. You may have an opportunity to use a renewal option to negotiate different pricing or payment terms in your contract, especially if your contract includes a CPI price escalation clause for goods and services. You need to review your contracts and make sure that these renewal periods are on your calendar.
Corporate Compliance? You hear this every year, but the New Year provides a great time to review your corporate compliance. Are your bylaws, shareholder/director actions and shareholder/close corporation agreements out of date or no longer fit your company? Having up-to-date corporate records are important to the preservation of the limited liability of a corporation’s shareholders. Meanwhile, clearly documenting how decisions are made in a company and how ownership can be transferred or purchased upon certain triggering events, like death or termination of employment, can protect against expensive lawsuits common with these issues. While many clients often find these records unnecessary, they can be lifesavers in the event of a lawsuit or tax audit.
So, next time you are riding on your Peloton, don’t just think about your New Years’ Resolutions, give some thought to your business. Making time to review these housekeeping issues will not only help avoid problems for your business in the future, but preserve time for you when a crisis develops.
Here is wishing you and your business a prosperous 2023!
By: Michael E. George, Esq.
(330) 572-1304