Worst-Case Scenario: How to Plan For and Protect Your Business
Scott K. Schmidt, Chief Financial Officer, U.S. Money Reserve
It’s more than just doomsday thinking — preparing for the future secures your business.
If 2020 has taught us anything, it’s that we need to be prepared for the worst. As businesses small and large struggle to find their way in this new COVID-constricted world, many are rapidly discovering what works during a crisis and what doesn’t. Those who aren’t adapting to the modern world are being left in the dust.
With every crisis comes opportunity, however, and the trick when planning for any worst-case scenario is to gain the perspective and space to see opportunities when they arise. Here’s how to plan and protect your business from a crisis.
Crisis Comes in Many Forms
As a small business owner, you likely realize there are threats all around. That may sound dire, but it is the reality of the world today. Business is tough, and it takes grit, determination, creativity, and passion to create something sustainable and successful over the long term.
It’s essential to recognize that crisis can come in many forms. Crisis may hit as an unseen virus that takes the lives of more than 200,000 Americans in less than nine months. It could be a sudden legal battle that envelops your company. It could be a premature dissolution of a supplier or a constriction in the materials you use to make your products. It could be a shortage of certain commodities. It could be an act of nature: a freak flood, hurricane, fire, or earthquake.
While it may seem utterly overwhelming to address all of these issues, it’s best to realize that not all businesses will be vulnerable to every crisis. Some, simply by the nature of their business, will be utterly untouched by certain types of events, while others will be far more susceptible to several potential issues. The trick is to identify those crises that are most relevant to your business.
The best way to tackle what you should focus on is to ask yourself what could possibly disrupt your current business. Is it a tech crash? An unseen virus? A flood or other natural disaster? Once you have a short list of the top factors that could impact your business, it’s time to move to the next step: creating a plan.
Get a Plan in Place Before Crisis Strikes
Every business needs a crisis plan in place. Crises can take many forms, and they can strike at any time, so having a contingency plan can both give you peace of mind and offer a map to follow if and when a disaster happens. Once you’ve identified the top three to five crises that could significantly impact your business, it’s time to get down to brass tacks and get a crisis plan in place for each potential event.
Some key questions to consider include:
- Who are the main stakeholders who need to be involved in making crisis decisions if this event happens?
- What vital parts of the business would be impacted?
- What can serve as a backup should one of the main, core business lines be impacted? What other products or services could be spun up or shifted to in order to keep your doors open?
- What should we consider once the crisis is past? What’s the process for safely reopening or restarting the business?
- What is the most important asset to protect? (Typically, this is your people, but it could be something else.) How much are you willing to risk or sacrifice to keep this asset?
Once you’ve answered these questions, you can start to put together a contingency plan for the specific crisis you’re planning for and move into the next phase of protecting your business.
Find Ways to Access Cash Quickly.
Whether you have a rainy-day fund or can sell equipment quickly to make ends meet, any crisis requires cash reserves. Perhaps you need to pay your employees to keep the doors open. Maybe you need to continue to pay rent or pay creditors to ensure that your business doesn’t fall into arrears. Once you’ve answered the five questions above, you should dig a little deeper to figure out just how much it might cost to keep your business up and running through a crisis. The critical question to answer at this point is: How much would it cost to replace the business or keep it up and running? How much money do you need to feel secure in your business through a crisis?
Once you have figured out the numbers, it’s time to either start saving for that rainy day or find a way to quickly finance your business while in the throes of a crisis. If you don’t have easy and quick access to cash, see if you can tap into federal, state, or local programs to get immediate access.
For example, more than 70 percent of business owners in the U.S. applied for the Paycheck Protection Program, according to recent numbers. That’s a tremendous number of businesses that simply needed the cash to cover issues during the COVID crisis. Many cities, states, and even large companies are offering grants for small businesses facing tough times right now. You can also seek help at your local Small Business Administration office because they will be best suited to know what might be available in your area.
Invest in the Right, Flexible Technology
These days it’s more apparent than ever that we need to be extremely flexible as business leaders, owners, and human beings. Finding innovative ways to allow your workers, your business, and your home life to flex is crucial to continuing business operations when things get dicey. As you are planning for a potential business stoppage, ask yourself what kinds of investments you can make right now to ensure that your business survives a specific crisis.+ What technology should you have in place now to continue to serve your customers and clients?
Perhaps that means investing in the right mobile technology that is simple to connect. Maybe it means making connections with other companies in other parts of the world to prevent a crisis from derailing your supply chain. Either way, it pays to think about how to invest money right now to prevent or minimize business activities during an emergency.
As an example, let’s take a look at the gym and fitness industry during the current pandemic. As most gyms and fitness locations remain closed across the country, those that offered online platforms and outdoor classes are flourishing. Some small studios had begun to invest in online platforms before the pandemic, and these have seen significant growth as we all stay safer at home. Others have tried to wait out the pandemic and get the all-clear to open once again. Those who have had to wait have remained largely shut down for the last nine months, while those who were able to offer their classes and events online have remained relevant, connected, and even profitable.
Plan for Omni-channel Offerings
Another lesson we have learned during these strange days is that we need to find ways to make our businesses work on all kinds of platforms and in all kinds of situations. During the pandemic, many companies have had to pivot from solely in-person services to delivery and virtual models in order to survive.
If you look at the restaurant and entertainment businesses, you can see this exemplified. Many businesses shifted to delivery and take-out to meet CDC safety requirements. Others opened outdoor dining to accommodate diners who still wanted to come to the restaurant to eat. Some offered cocktail delivery and special deals to entice customers and keep their staff busy. While the restaurant business has suffered significantly in the current pandemic, a few companies are actually making it work and opening new streams of revenue at the same time.
The fitness example above also exemplifies this idea. Many studios have gone to hybrid offerings where people can choose to attend classes in person, but those who don’t feel comfortable being in an enclosed space can still join online. Planning to offer your services and goods in various ways is vital to ensuring your business’s longevity.
Understand That You Can’t Plan for Every Crisis
One final note: Know that you can’t plan for everything. This year has taught us that there is truly no way to predict the future. There was no way to see this virus coming, nor was there any way to know how it would spread and affect the entire world. That doesn’t mean you shouldn’t do your best to prepare for the kind of crises that could affect you the most, but it does mean that you shouldn’t stress yourself out trying to cover all your bases. The truth is that there will always be some new and unexpected issues to deal with as time marches forward. We all just have to learn to be adaptable and flexible. We also need to consider the lessons of history and ensure that we have the right protections in place should something like the current COVID pandemic hit again.
While it pays to have contingency plans in place, you need to also understand that there is no humanly possible way to prepare for every crisis. Some are just going to happen. If you do the work now and plan for the crises that are most likely to impact you significantly, however, you can ensure that your business is ready to survive the next massive event.