Murphy's Law dictates that something will eventually go wrong, and when that something goes wrong, something else will go wrong at the same time.
A few years ago, a friend of mine had a small business that was just making it. One night, a water main broke near his place of business and flooded it, destroying all of his inventory. Even though it was all insured, he essentially had to keep the doors closed for several weeks. Just as he reopened, the fire marshal reassessed the entrances and exits of his building and judged that they were inadequate for a place of retail business, which caused another closing. After opening again for just another week, a drunken riot took place on the block where his business was located, resulting in the windows of his business getting smashed and a large portion of his inventory stolen.
Needless to say, he closed his doors after all that.
Now, most of us will never go through a run of bad luck like that. However, we all will eventually go through a string of unfortunate events that might force us to close our doors for short periods or go through other extraordinary crises. In these events, it's good to have a strategy already in place to ride out the cash flow disruption.
Here are five strategies to do just that.
Have an emergency fund / cash reserve. Many small businesses run with a very tiny cash reserve. Eventually, that small cash reserve comes to bite them - often resulting in the closure of an otherwise successful business. Don't let that happen to you. Don't be afraid to hold onto cash within your business for just such emergencies. In fact, one great method is to treat cash savings as a regular bill. Each week or each month, automatically move a portion of your business cash into an emergency savings account.
Don't rely on credit for that emergency fund. "Why not just use credit for that?" many small business owners will ask. To put it simply, cash is king. The moment in which a bank is likely to deny you credit is the very same moment in which you will need it the most. On the other hand, having direct access to nice, liquid cash can take away the worry of having to rely on the decisions of a banker to solve your business problems.
Get business insurance. Many of the bumps and potholes a small business faces can be solved with adequate insurance. Business interruption insurance - a policy that helps your business through an unexpected interruption - and key person insurance - a policy that helps in the event of losing key personnel - can really save you in your moment of need. The Small Business Administration covers the varieties of small business insurance in detail.
Join the Chamber of Commerce and other business groups in your area. Groups like these are loaded with other small business owners who are often facing many of the same challenges you are. Join these groups, get involved, and meet lots of other business owners. Help them when they need help and you can easily provide the help. Then, when your time comes, you'll have many people to call on to help you in your time of need.
Network, network, network. Networking for your business goes far beyond the Chamber of Commerce. Make an effort to build a strong relationship with your suppliers, with your top clients, and with your neighbors as well. All of these people are essential in the flow of your business - and those relationships will be vital if something disastrous happens.
You can take the little actions now to ensure that the big disasters don't befall your business in the future. The choice is yours.