“Forewarned is forearmed.” ~ Latin proverb
Things happen. In many cases you can’t prevent them from happening, but you can be aware that they could occur so you can be prepared. Here are 10 situations you should be thinking about and what you might be able to do now. Preparation can save you financially, and help you sleep at night.
1. Fires, storms, and other natural disasters
With the wildfires in California and Hurricanes Helene and Milton still fresh in our mines, it’s vital to recognize how a company’s operations can be temporarily disrupted or put out of business entirely.
What to do: Review your insurance coverage to have a financial backstop for property losses and take other measures. Disaster preparedness is discussed at length in a previous blog.
2. Cyberattacks
Any unauthorized breach of your data can be devastating. There can be ransomware attacks, malware installed on your system, or hacking to obtain customer and employee data. These attacks can grind your business to a halt and cost you serious dollars.
What to do: Review your company’s practices to ensure you are doing everything possible to protect yourself. For example, be sure data is backed up to the cloud. Consider cyber liability coverage to have a financial backstop in case of a breach. The insurance proceeds can help data restoration as well as required alerts (and identity theft coverage) to employees and customers whose personal information may have been compromised. Find more information about best practices for cybersecurity for small businesses from the FTC.
3. Technology glitches and equipment failures
Most businesses depend on technology. Many companies use machinery and equipment to conduct business. When things go wrong, there can be delays, lost revenue, and even long-term consequences.
What to do: Keep your technology and equipment up to date; don’t let them fall into obsolescence. Computers can easily be put offline when internet connections are disrupted. Consider your connectivity solutions (e.g., use Starlink as a primary or secondary source), especially if your business depends on online sales. Be sure to keep your machinery in good repair to avoid breakdowns. Replace old equipment—to avoid breakdowns as well as save money on operations because new equipment usually uses less energy.
4. Supply chain disruptions
During the pandemic you may remember there were supply chain disruptions that caused many businesses to lack the inventory or raw materials they needed. Disruptions can occur at any time. Vendors may experience their own problems—natural disasters or financial issues—that prevent them from satisfying your needs.
What to do: Carefully monitor your inventory to be sure you have a sufficient cushion to withstand supply chain disruptions. Be sure to have other vendors you can turn to when needed.
5. Lawsuits
Small businesses are particularly vulnerable to many types of lawsuits by employees, customers, and even other co-owners. Yahoo! reported that 37% of small business owners had litigation in the past year.
What to do: Using best business practices can go a long way in avoiding lawsuits or at least helping to secure good outcomes if they occur. For example, be sure to use safety measures to avoid accidents on your premises. Use contracts to define terms with customers, clients, and vendors. Work with attorneys who can advise you on best practices.
6. Thefts or embezzlements
It’s sad but true that employees, customers, vendors, and even co-owners may steal from you. Inventory can disappear. Money goes missing from bank accounts.
What to do: Again, adopt sound business practices to avoid or minimize thefts. The U.S. Chamber of Commerce has 5 tips for employee theft prevention. To avoid losses from embezzlement, be sure to monitor funds carefully. For example, to keep the proverbial bookkeeper from embezzling money, limit employee access to your bank statement so you can review your funds at least monthly.
7. Loss of key employees
Your business may be dependent on certain employees because of their skills or talents. Or you may simply have come to depend on some employees, who know the ins and outs of your operations. When someone like this departs, it can disrupt things.
What to do: Recognize the importance of having duplicative talent so that no single individual can cause havoc when leaving your business. Consider key person life insurance to have a financial resource that can help to replace an important employee who’s died.
8. Cash flow disruptions
Whether you experience cash flow problems because you mishandle your finances or they result from unexpected expenses or problems with customer payments, you can really find yourself in trouble. Cash flow is the lifeblood of the business. According to a study some years ago by SCORE, 82% fail because of cash flow problems.
What to do: Use tools to monitor your cash flow on a regular basis. Also consider having a line of credit in place that you can tap into in a cash flow crunch.
9. Attacks on reputation
Social media posts by a disgruntled employee or an unsatisfied customer can cause considerable harm to your company’s reputation. The same is true when employees are rude to customers, who may spread their unpleasant experience through word of mouth.
What to do: Don’t ignore attacks on your reputation; address them in a productive way. For example, if a post on Facebook describes a customer’s unfavorable incident with your business, own up to a problem and correct it. Reach out to the customer to provide satisfaction, and note your positive actions on social media.
10. New governmental rules and regulations
Actions by federal, state, and local governments can pose serious threats to your business. They may require actions that can cost you big bucks. For example, a new tax or a rule can eat into profitability.
What to do: Stay informed on developments through your local chamber of commerce, industry trade group, and the media. Work with professionals—an attorney, a CPA—to comply with new requirements and minimize the cost to your business. Don’t incur penalties that you could have avoided.
Final thought
“Failure to prepare is preparing to fail.” ~ Attributed to Benjamin Franklin
Small business owners need split personalities: one to work in the business to operate the business by servicing customers and make sales; the other to work on the business so that it can run smoothly. The latter is not as much fun as the former, but equally important if not more so. Thinking about prevention can be a boost to your bottom line and help ensure that your business can survive whatever it faces.
