Prepare for a Business Disaster Before It Becomes a Business Disaster
August 16, 2019
Business owners seem to have a million and one things to do each day and never enough time to accomplish everything on the list to do. Increasing sales, improving marketing, motivating employees, or satisfying customers all rank high on the priority list. However, alleviating the drastic effects of a potential business disaster (should one materialize) never seem to make the list.
Plan In Advance
Planning in advance seems simple enough but takes forethought. “If we cannot completely eliminate a potential business disaster, then what do we do?” is an important question every owner should ask himself. Businesses will always have some type of external threat that could become a business disaster if not planned for in advance. Since external threats cannot be controlled as compared to controlling internal threats, plans should be made to lessen as much as possible any negative effects if the threat actually materializes.
What Can Be Done?
Business owners should list (or at least mentally consider) the potential threats existing for their businesses. Since each business is unique regardless of industry, size, and location, a “one-size fits all” solution cannot apply. Businesses have different internal resources and strengths that can help compensate for any external threats should they develop.
Planning needs to be based on each potential business disaster such as:
Major equipment replacement: Establish a reserve (emergency) cash account that is funded on a periodic basis, so cash is available (at least a downpayment) if and when needed. Excess funds in this type of account can always be transferred back into a general operating account if and when the funds are no longer needed.
Vendor cannot deliver inventory needs: Whether inventory is needed for resale, used in a service business, or needed for manufacturing, business cannot come to a halt because of vendor problems. Rather than depending on one vendor, businesses can broaden their buying power to include several vendors (or have alternate vendors available) should one vendor not be able to deliver.
Sales decreasing or remaining stagnant: Although this is a common problem for many small businesses and SMEs, there are ways to combat this trend:
• Keep a database of current and potential customers and contact them on a regular basis
• Diversify current product or service line of business
• Add new products and services to complement products and services already being sold
• Create an emergency cash reserve fund (similar to an equipment reserve fund), so working capital is available when sales are slow. Bills and employees still need to be paid.
New competitor enters the market: Few monopolies exist in today’s business world, so businesses must be prepared for the inevitable. This might be a new marketing campaign with a broader scope or different focus. Perhaps, it might be a special promotion that worked in the past or a new one still to be tested.
Key employee resigns: Although one goal of every business should be employee retention, a fact is that a certain number of employees will leave for various reasons...health, relocation to another city, different or better opportunity, etc. Cross-training and mentoring employees is key to filling any gap left by a departing employee.
Being proactive is preparing for a business disaster before it becomes a business disaster. Decisions made today can have positive results depending on what tomorrow brings. Business disasters can either (1) happen and be devastating for a business or (2) happen, but with proper forethought and planning, have minor negative effects. The choice lies with the owner.