4 Ways To Prepare Your Business For Worst Case Scenarios
Whilst being positive about your business is important, being realistic about it is even more so. If everything you do is centered around your business being a success, if/when something goes wrong, it is going to be a big shock and it could cause your business to crumble. So, let’s find out how to prepare your business for worst case scenarios!
Use A Decision Tree
Trying to decide where to begin with this process can be very daunting, which is why it is best to create a decision tree. Start by doing a risk assessment of what could go wrong (there are so many different guides online to help you map this out), such as natural disaster, pandemics, economic downturns, changes in government regulation, new technology emerging, new competitors emerging or major employees leaving.
From here, start to consider what you would do if these things happened. Forecast the worst case scenario that could occur and then figure out what you need to do to protect the business should this happen. Some of these things might require the same action, whilst others will need a unique action. This is the best way to identify barriers to your business and figure out what your business will need in the worst case scenario.
Get The Right Insurance
To protect your business financially, it is essential for you to have the right insurance. Work with a broker to make sure you get the exact cover that your business needs, as the initial investment will certainly be worth it later down the line. The nature of your business will depend heavily on the type of insurance you need, so if you have a very large company, you may need to work with different brokers for different types of insurance, such as whole turnover insurance, public liability insurance, personal accident insurance and much more.
Do your research here, as putting the time in now could quite literally save your business should the worst happen.
Have A Strong Continuity Plan
Although this has already been touched on, having a strong continuity plan in place should an employee leave is important. This is especially important if you have a small company, or if you have members of your team that your business absolutely could not live without. So, you need to identify the key members of your team and figure out what you would do if they were to leave. Look at who would take over their role and what you would need to do in terms of training.
It is worth noting that if your business couldn’t survive without someone, offer them more appealing benefits to increase the chance of them staying with the business.
Cash Flow Planning
Last but not least, you need to create a cash flow forecast. As any business owner, having a knowledge of financial planning for your business is non-negotiable. You need to know your numbers inside out to protect it moving forward. Keeping a close eye on your cash flow will make sure that you should be aware if you are going to run out of money and you will be able to look at what you can do to change that in advance, whether this be to cut overheads, find new investment or simply push to generate more sales.
Start by deciding how far you want to plan for. This should be as far as you can accurately predict, perhaps based on the previous years. Of course your cash flow will change constantly, but knowing the sort of direction the business is moving in is important.
The best way to forecast your cash flow is to create a list of all non-sales income such as grants, investments or tax refunds and then list all of your outgoings that are non negotiable, such as salaries, raw materials, rent, tax bills and loan repayments (these will differ significantly depending on your business). Now you have everything in front of you, you can look at whether you are spending more than you are making and how you can change this.
When you think rationally from the beginning about what could happen to the company and get everything in place that needs to be, your business will be protected should the worst happen.