December can be a tough time for many entrepreneurs. They want to finish the year on a strong note, plan their business for the following year, and take personal time to relax and be thankful. The last thing they need is for something unexpected to strike the company. It may make them realize they don't have contingency plans for their business.
Not having contingency plans for various aspects of business operations could derail a business owner's growing company. In order to get a sense of how you may deal with the unexpected, business owners may want to play the “What If" game. This series of questions can help you reach answers to potential problems before they happen.
When you play the “What If" game, you may want to include key people involved in your business: partners, advisors, attorneys, accountants, insurance agents and managers. It helps if everyone who plays a role in your success has a contingency plan in the event disaster strikes. Remember: There is no plan B to not having a plan B.
Want to play the “What If" game? Let's get started.
1. What if we lose our largest customer tomorrow? Do we have contingency plans?
This can be an especially painful experience if your largest client represents 25 percent or more of your annual revenue. I've seen it happen a hundred times. Companies almost always know when they win a big piece of business—they almost never see the big losses coming.
You could have a good, profitable business on the verge of collapse in a single day if you lose your largest client. What would you do if this happened to your business?
2. What if our star salesperson leaves the company?
Many times companies don't appreciate an all-star salesperson until they are gone. This is similar to losing your largest client. If one salesperson represents at least 25 percent of your total revenue, it's important to have a plan B in place should they decide to give their two weeks' notice—which obviously isn't enough time to find a suitable replacement. What would you do?
3. What if we get hacked?
Small-business owners are getting hacked with regularity. Is your company prepared to deal with a hacker during the holidays, or would it cripple your business during the most important part of the year? The time for you to answer this question is not after it happens. Talk to your IT person/vendor to find out available options that will keep downtime to a minimum.
4. What if disaster strikes our company?
When is the last time you had an insurance checkup?
If your business is growing and you've added employees, new locations or products/services, then you may be due for a talk with your insurance agent to make sure that you have proper coverage. You may also want to confirm that your data is properly backed up to the cloud and not stored on premise. If a fire or flood destroys your offices, it could destroy your backup data as well.
5. What if we cannot collect our receivables?
Cash flow is a big reason that restless business owners can't sleep at night. It's also one of the main reasons companies go out of business—they simply run out of money.
You can start addressing this issue by being a squeaky wheel with your customers. You probably don't want to let net 30 become net 60 or net 90. If customers miss payment dates, it can be a sign of trouble ahead. If most of your customers are in an area that often deals with natural disasters (e.g. hurricanes, fires, flooding), you may want to get receivables paid before the natural disaster season starts. Otherwise, you may run the risk of substantially increasing your level of bad debt overnight!
6. What if we launch a new product/service or location and it fails?
Failure among growing, entrepreneurial businesses has been known to happen. Growth is rarely a straight line and the level of risk must always be factored into every growth opportunity.
As longtime gamblers will tell you, “Always bet with your head and not over it." Try not to let a growth venture derail your entire company; have a fall back plan in the event the new location, product or service doesn't succeed.
Read more articles on planning for growth.