This post is contributed by Jason Dirkham
When you’re getting a startup up and running, helping it find the path to profitability, so much of your attention can be focused on getting the momentum that you need, going on the offensive, that you can forget that you need defense as well. There is a range of forces, both inside and outside of the business, that can be a major shock, leading to downtime, the risk of financial loss, and other kinds of trouble. Here, we’re going to look at the steps you need to take to ensure that your business can survive a shock.
Have cash reserves standing by
Your ability to handle shocks to normal business operations depends largely on how you’re able to handle the costs of such shocks. We are going to identify investments you can make to protect yourself and prevent such shocks in the first place, but when it comes to a disaster that you are not fully ready for, then having accessible funds is crucial. As such, a business should always keep cash reserves so that it doesn’t have to so easily rely on credit or on cutting costs, which can often result in losses of operational capacity that you later have to claw back.
Consider keeping a line of credit open
Of course, when it comes to having cash reserves, having to rely on a line of credit does come at a cost. We would like to save up the money we later have to rely on rather than pay back that money plus interest. However, it’s still wise to have an open line of business credit to protect your business, especially when it’s in its fledgling stages and you might not have the time to get those cash reserves together. However, relying on credit, especially when your business is so young, demands that you’re strict on how it is used, following good credit sense tips to ensure you’re not relying on it for regular expenses, and choosing the best credit options for the business.
Insure what matters most
Of course, when it comes to protecting your assets and the operation of the business, then insurance is the ready-made tool that’s at your disposal. It protects you from having to totally cover the costs of a wide range of disasters. Some forms of business insurance are mandatory by law, depending on what type of business you are running, whether you have employees, vehicles, and so on. But it might be worth investing in some of the other types of business insurance, as well, such as business interruption insurance. This insurance, in particular, is all about protecting the income you would make if not for a business interruption, as well as covering the costs of getting back up and running after said interruption.
Know where you can scale back
While having cash at your disposal to help you get over the bumps in the road is the preferable option, there is no denying that when push comes to shove, you are likely going to have to cut some costs where you can. This is a worrying topic as some might think it could mean selling resources that you later need or reducing your workforce. As mentioned, you don’t want to cut off what will later be costly to claw back. As such, you should have a budget that looks at what costs you can cut first and most easily to free up cash. As such, you don’t have to make that decision when you’re dealing with the pressure of an internal or external shock.
Put a disaster recovery plan in place
Most businesses can identify the potential causes of major downtime, at least internally. For instance, most businesses rely on technology, so factors like a power cut of equipment malfunction should be considered. For businesses working online or with digital assets, data breaches and loss are other disasters to consider. A disaster preparation and recovery plan can be put in place by identifying your risks and creating the steps to get back up and running after those risks take place, such as having an electrical contractor on standby to help you get back up if your equipment goes down. Without a disaster recovery plan, it can take you a lot longer to get your business back on its feet after an internal disruption.
Allow for flexible working conditions
Even after the lockdown is lifting in a lot of places around the world, it seems that business owners have finally come to the long-established benefits of allowing for remote working. By enabling employees to work from home, it can eliminate a lot of the downtime risked by a localized issue in the workplace, not to mention something as far-reaching as a pandemic. Remote working isn’t the only example of flexibility, either, allowing employees the chance to work in time frames that match their productivity is recommended by a lot of people who speak in favor of workplace flexibility, too.
Empower your employees
As well as proper planning and have the resources available, there’s no denying that on-the-fly adjustments often need to be made in response to market and internal shocks. However, business leaders should not be expected to be able to do all of this alone, as it might take all kinds of expertise and creative thinking to come up with an effective solution. Workplaces that are in some way democratized, such as worker co-ops, have shown resilience in response to things like price shocks and market shifts, and it is thought this is in large part due to the better use of the minds of the whole labor force, rather than the burden being solely on one individual. This doesn’t mean you have to turn your business into a co-op, but empowering your team to make decisions and soliciting their insight could open solutions you might not think of alone.
Identify pivot potential
There are some market shocks that are so major that simply trying to business as normal simply will not work. One of the most recent examples we can look at is with the COVID-19 pandemic. A lot of businesses temporarily shut their doors, but others managed to stay open and operational in some capacity by looking at how they could pivot their productivity. For instance, a lot of companies in manufacturing and building are instead looking at providing services like selling masks or testing booths. This is a very specific example, but looking at ways you can pivot what your business offers could allow for some flexibility in cases where normal operation simply isn’t going to be possible for some time.
A ready and motivated workforce
If you want to be able to bounce back from disaster or to navigate a new challenge with the kind of agility that you need, then there is no denying that you need a strong workforce, invested in the business, and at the ready to leap back in. One of the best ways to do that is to ensure you’re investing in your employees, offering them new skills, career paths, and the incentives that they need to stay invested in the team they’re a part of.
The tips above can help you prepare a business that is more resilient to the various kinds of disruptions that businesses of all kinds are threatened by. It can also help ensure that it has the agility to react in a way that keeps your momentum going forward as best as possible even as circumstances change.
This post is contributed by Jason Dirkham
