Local First Blog

Why Your Small Business Needs a Contingency Plan

Dec 2, 2016 1:07:00 PM / by Local First

Emergencies and disasters don’t discriminate. They can affect any organization or business, including yours.

The most obvious examples we hear about are large disasters, such as earthquakes, that rarely happen, but we expect would significantly disrupt operations at most businesses. Since these large disasters don’t occur regularly, we become complacent.

But what about more common examples – such as snow storms, power outages, floods, fires and hazardous materials accidents? These smaller events do occur regularly, and can impact your business at several levels from your employees to your bottom line.

Preparing for and responding to negative events, whether they are small or large, predictable or not, requires planning and focus. A contingency is anything that happens outside the range of normal operations that can affect the company’s ability to operate.

Contingency planning involves asking yourself what could go wrong for every aspect of your business, and then preparing an action plan for what you will do if that happens.

Think about it: what functions and resources, if interrupted or lost, could impact your ability to provide goods and services or meet regulatory requirements for your business?

Having such a plan ensures that your business is prepared to handle potential threats caused by a major event, which can help reduce time to recovery and minimize loss.

But contingency planning can significantly benefit your business in many other ways, too.

Not only can it provide the edge the small business owner needs to establish a niche in the market and sustain growth, it can also help with the following:

It can reveal inefficiencies.

A business under threat can be viewed like a patient on an operating table. The priorities are clear: maintain the blood supply (cash flow), oxygen (communication links) and at all costs protect the vital organs (the staff and premises).

Business continuity planning starts with a thorough analysis of the business to decide which parts are vital. Is that product or service really essential to what we do? Why do we need four of those, not two?

When viewed like this, the non-critical parts reveal themselves – all the procedures and resources that have appeared over the years, but which aren't really necessary.

Help you gain a marketing edge.

Contingency planning can give you the edge over your competitors. It shows your commitment to deliver no matter what happens. Put yourself in your customer's shoes: do you sign the contract with the business that has a business continuity plan? Or the one that doesn't?

Result in increased value.

A business that will cope with whatever is thrown at it is a more valuable and reliable investment than others. Ensure this is factored in when asking for a loan, selling some equity, etc.

Can be used as a negotiation tool.

Knowledge is power. Understanding the principles of business continuity means you can spot weaknesses in other businesses. If your main supplier is asking for a price increase, ask about their business contingency plans. If you spot holes, you can ask why you should pay extra when there may be more reliable suppliers out there.

Promote relaxation!

While other business owners lie awake at night, you can rest easy knowing your business contingency plan is ready, and your business is prepared should the worst happen.

Planning for a disruption or catastrophic event should happen when business is going well, not when disaster strikes. Having a pre-defined, well-documented business contingency plan that clearly communicates how your business will respond during an event can help mitigate risk — and is one of the best investments your company can make. 

For help with planning, the Small Business Association (SBA) offers a variety of useful resources to help you prepare your business.

 

About Stingray Advisory Group LLC: Stingray Advisory Group LLC is based in Grand Rapids, Michigan and a proud Local First member. By creating dynamic customized solutions for business growth, we empower businesses and entrepreneurs with the tools to further their development. To learn more or schedule a consultation, visit www.stingrayadvisorygroup.com. Follow us today on Facebook, LinkedIN, Google+ and Twitter for more helpful tips!

Contact us through email at info@stingrayadvisorygroup.com today!

Local First

Written by Local First