Planning to Fend Off Failure
Too many businesses fail without a 'disaster' plan.
The latest news about the recession has taken a more positive tone, but that may be coming too late for many small and family-owned businesses. According to the Bureau of Labor Statistics, about 4.3 million businesses with 19 or fewer employees closed in the first year of the recession – between fourth quarter 2007 and fourth quarter 2008.
And many more have likely closed since then, as well.
According to a recent article in The Wall Street Journal, part of the problem is: "These businesses, often steeped in tradition and not as flexible to change, tend not to have formal plans in place to respond to crisis." (emphasis added)
In this case, the recession is the crisis, but it can be many things, from hurricanes and earthquakes to large customers going out of business. Now that things are starting to turn around, building a crisis plan into your recovery plan could save you the next go-around.
A great place to start when building the plan is with scenario planning, a topic Mike Marks of Indian River Consulting addressed at the Power Transmission Distributors Association and Fluid Power Distributors Association meetings in San Diego, CA, last week. Marks broke out scenarios into three parts in the presentation: the "Just suppose…," early indicators of the ‘Just suppose’ occurring, and a quick reaction plan. "There should be many scenarios to get you outside your comfort zone," he says.
Begin by identifying potentially disastrous situations, no matter how unlikely they may seem right now, and asking yourself, "What would we do?" What would you do if, for example, your largest customer filed for bankruptcy protections? Or, if your lender called in your credit line? Or even something as simple as losing your Internet connection for a day, a week, a month.
Identify any early indicators that can help you get a jump on recovery. The earlier you know something is wrong, the quicker you can act to head off disaster.
Formalize your plan for responding if any of those indicators appear – or if a crisis arises. With written procedures, the company can respond even if you aren’t there.
Scenario planning is not a new topic (Dr. Adam J. Fein wrote about it for MDM back in 2002.), but Marks’ presentation serves as a good reminder that the only time it’s too late to undergo crisis and scenario planning is after your company has failed.
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