Contingency planning is important in any business but too often not performed for small businesses. Contingency planning is key when planning and running your small business. It provides the forethought to keep potential risks in mind. We all hope that our businesses take off and become instant successes, but often that is not the case. If your company does not take off as you planned, what will you do then? If you have employees, will they lose their jobs? Will you have to sell your house to make ends meet? Will you have to file bankruptcy?
The fact is that all businesses can face unexpected issues at any time, and it might not be something that they saw coming. It isn’t easy to prepare accordingly without looking ahead and trying to identify when things may derail. The more you can prepare for the unexpected, the smoother your venture will be.
Business owners can do many different things to create a contingency plan and make sure they’re better prepared if something goes wrong. One of the most important activities in this process is including all stakeholders early on, so everyone knows what to do if the unexpected occurs.
What is contingency planning?
Contingency planning is the process of preparing for unexpected events that could impact your business. This type of planning can range from simple to complex; it can be as easy as purchasing additional inventory during good times for use during down periods. On the other hand, it could include complex financial analysis and strategic decisions made by management.
Why should small business owners care about it?
Having a contingency plan in place gives you peace of mind knowing that even if something were to go wrong with your business, you’d know what to do next. It will also give you more time to spend taking care of your customers and ensure everything continues smoothly, instead of worrying about how you’re going to cover expenses when your cash flow is no longer flowing.
How to create a plan for your business?
First, you’ll need to identify the risks that are specific to your small business. What are the areas where you could get stuck if the worst were to happen? Think about obstacles, including lack of cash flow, key personnel shortages, and damage or theft of property.
Then consider how your business would deal with them if they did come up. Look for outside help if needed; outsourcing is often cheaper than hiring more staff full-time. If possible, keep costs low while developing contingency plans until you have greater financial resources available.
The benefits of Contingency Planning
The benefits of having a plan before anything goes wrong include:
- Preparation for the worst while hoping for the best.
- Reduction of company’s risk of failure.
- Development of a reusable plan that minimizes the financial impact that comes with emergencies.
- Knowledge that your business is prepared to handle anything life throws at it.
- Peace of mind that you won’t be forced to close your doors due to an unforeseen issue.
Having a contingency plan in place for your small business will give you peace of mind knowing that even if something were to go wrong with your company, you’d know what to do next. It will also provide you with more time to grow your business rather than putting out fires.