Almost always following a significant company crisis, business owners lament, “If only I had done X.” Occasionally, they knew they should have completed these tasks, but they did not. Other times, there was an unanticipated catastrophe that could have been averted if certain precautions had been taken.
Between my own and those of my colleagues, I’ve witnessed a number of errors with severe consequences for the health of a business. Here are four methods for business leaders to safeguard their companies against life’s most unpleasant surprises.
Have Sufficient Risk Coverage
Insurance is expensive, and you may only carry it if your clients require you to select a box indicating that you have it. Nevertheless, there is one certainty regarding business insurance: when you need to submit a claim, you will be extremely grateful to have it.
It does not necessarily follow that more coverage is preferable. The most essential factor is having sufficient insurance to cover your vulnerabilities. Consider cyber insurance policies if, for instance, a single ransomware cyberattack would result in the complete shutdown of your business.
Or, if your product shipments are delayed for months as a result of another barge clogging the Suez Canal, these losses can be mitigated. This is illustrated by SRA 831(b) Administration, which executes an 831(b) Plan.
This is essentially a tax-deferred war chest for a company’s risks that lie outside the scope of traditional insurance. Some of these resources formerly catered primarily to large enterprises, but new companies are emerging to serve small businesses and entrepreneurs with comparable offerings.
Obtain a Writing
A handshake conveys trust and can be an excellent beginning to a business relationship when used to close a transaction. Occasionally, however, a simple misunderstanding or difference in recollection can cast doubt on the particulars of a handshake agreement. Therefore, even if you are concerned about offending the other party, you should put all agreements in writing.
This applies doubly to family and acquaintances. It is not a trivial decision to enter into business with a close acquaintance. I cannot count the number of times I’ve witnessed relationships between coworkers being harmed because an agreement was not documented and was therefore misinterpreted by one or both parties. If your sibling is a vendor for your business, a written contract can prevent future awkward family dinners.
Develop and Maintain Beneficial Connections
This does not imply that you should avoid developing intimate business relationships. When unexpected disasters strike a business, it is often necessary to seek outside assistance and counsel. You may require guidance from a mentor or assistance from a fellow colleague. In times of crisis, these can be the saviors that save or even save your business.
Obviously, you must benefit others in order to establish these relationships. Frequently, I’ve strengthened relationships by consenting to speak at an event at the last minute when the originally scheduled speaker had to cancel. Being willing to come to someone else’s aid fosters a positive reputation among contacts and colleagues. When trouble arises and you’re in need of assistance, this can be a lifesaver.
Maintain liquid assets
When business is thriving, it is tempting to spend lavishly on expansion, benefits, and innovative new business ventures. Aside from the possibility of earning a small amount of interest on a money market account, maintaining significant cash balances may appear futile.
Unfortunate as it may be, when cash reserves are low, the unexpected can send businesses for a loop. When the pandemic struck in 2020, the entire globe learned this. We needed sufficient cash reserves to continue paying our employees even if all of our income disappeared.
Thankfully, it never came to that, but having those financial reserves would have been crucial if sales had plummeted. Keep in mind that PPP loans are not available for every emergency.
As recent events have demonstrated, business proprietors may experience calamity when least expecting it. Some of these catastrophes may even be manmade.
Whether you are preparing for a recession, a severe weather event, or a supply chain snafu or simply attempting to avoid scoring an own goal there are ways to mitigate the impact. Establishing the proper precautions in advance can help your business survive whatever the world throws at it.