As a business owner, you will face lean times – it’s just part of doing business. These business hurdles can be an unusual lull in bookings, a staff walkout, a higher-than-expected price hike in your overhead or cost of goods, an owner illness or accident, or some sort of catastrophe such a fire, earthquake, flood, or any other natural or another type of disaster.
Regardless of what could happen, it’s important always to be ready with a plan. The old saying, “Hope for the best but plan for the worst” is indeed good advice for any business owner. The question is, are you ready for the proverbial rainy days ahead?
One of the most obvious ways to be ready for a disaster is to be sure that you have the right insurance. Not just the type of insurance but the amount of coverage. You’d want to make sure that you had ample coverage to handle any damages plus any downtime for you and your staff. Your CPA can help you determine how much loss you should plan for based on your overhead, employee, and operating expenses. It might also be advised to speak with an insurance broker, as they can put together several plans and price the policies through multiple insurers.
Rainy Day Reserves
A must-have for any business, be sure that you have a decent reserve fund for emergencies. This fund should be a liquid savings account that you can tap for running expenses in down times. As important as it is to have at least six months of expenses saved up, it’s equally essential to replenish the account every time you need to dip into it.
To initiate a savings plan, start a separate savings account and make it a policy to contribute a certain percentage of all sales. You’ll need to crunch some numbers or work with your accountant to determine a realistic percentage for your situation. The key, as many accountants will tell you, is to pay this amount first and on a set payment plan (weekly or monthly) before paying any other expenses. Otherwise, you’ll find it too easy to skip when you reach the bottom of the stack of bills. If you are not able to manage any savings, it may be time to audit your expenditures to see where you can trim to make the rainy day fund payments.
Have a plan ready to take effect should there be a disaster. For example, if you’re doing business in an area that is prone to hurricanes or flooding, make a note of evacuation routes, share with your staff and have a means in which to contact each other should an emergency arise. You’d also want to have access to your client information in case you need to contact anyone to cancel appointments.
You also want to take general business safety measures in case something were to happen to your facility. Store important papers in a safe or safe deposit box, have client records stored and accessible in the cloud, have proof that you own the business somewhat available, and always keep your photo ID with you.
A hard pill to swallow, make it a priority to plan for any circumstances that could involve you being incapacitated or out of the picture entirely. Have the hard talk with your family, business partner(s) and/or second in command and give them instructions to follow in the event of your death or significant injury. Make sure that they have access to any required components of the business or that they have someone to report to in order to obtain the access. This difficult conversation is one you should also have with your attorney so that they can advise you accordingly.
Making Tough Decisions
There may come a time that you have to make some difficult decisions with your business. When you have a walk-out during the holiday rush or are in the middle of a natural disaster is not the best time. However, if you plan for as many of these dreaded scenarios as possible and have a strategy available for each case, most of the decisions will be predetermined, and the road to recovery will be that much easier.Share: