Any business owner will know that they can face sudden and unexpected challenges, and be forced to grapple with factors that are well beyond their control.
Perhaps your premises are damaged in a fire or through crime, or maybe there’s a wider slump in the economy or your industry that hits trading.
As a business owner, it’s your responsibility to be ready for the unexpected, so you can withstand any disruption and come back in a strong position.
You can do that by creating a financial emergency plan. Here’s how…
Look at your current financial situation
You can start building your financial emergency plan by gathering relevant documents such as balance sheets, cash flow reports and income statements.
You should also take a look at any outstanding invoices you may have, your existing debt obligations and any other areas where you could be financially vulnerable.
Identify potential risks
Think about what factors could possibly derail the smooth running of your business, both internal and external.
Internal risks could include losing key clients and cash flow problems, for example, while external risks may include economic downturns and natural disasters.
Once you’ve identified these potential issues, you can draw up strategies to mitigate each one.
Create an emergency fund
It’s well worth having a separate pot of money that can serve as a safety net during difficult times, so you can continue meeting necessary expenses from energy bills to staff salaries.
This should be easy to access whenever it’s needed, and ideally be enough to cover around three to six months’ worth of operating expenses.
Make sure you’re properly insured
Insurance is a lifeline in the event of a disaster, so make sure key areas of your business are properly covered and that each policy is suitable for your needs.
Your insurance should be regularly reviewed, as you can never know when you need to turn to your insurance provider, and you don’t want to find yourself without adequate protection when you need it most.
Draw up a crisis communication plan
Communication is key during a crisis, so it’s really important that key stakeholders across the business know exactly how to stay in touch with each other in tough times.
This includes everyone from members of your team to third parties such as customers and suppliers, so you can manage expectations and maintain important relationships at the same time.
Don’t put all your eggs in one basket
Many businesses make the mistake of relying on just one revenue source, so it’s well worth diversifying revenue streams where possible.
For example, you could actively seek to widen your target audience or roll out new products or services.
This could ensure your business is far less exposed to factors beyond your control, such as economic downturns, market fluctuations and changes in customer behaviour.
Get professional advice
You don’t have to create a financial emergency plan by yourself, as there are plenty of professionals who are there to provide expert guidance and support.
A financial planner, for example, can work with you to devise a realistic strategy that reflects your business’s current needs and circumstances.
With an expert at your side, you can make sure your business is resilient, financially sound and able to weather any storms you may face.
If you have any questions about drawing up a financial emergency plan to ensure your business is prepared for all eventualities, please don’t hesitate to get in touch, and we’ll be happy to speak with you.