Every entrepreneur has a plan, but not ever entrepreneur has a backup plan. Nobody goes into business expecting their venture to fail, but things don’t always go the way they are supposed to. It is because of these unkind eventualities that every business owner needs an alternative strategy. This is to ensure that no matter what comes your way, your company remains open and delivering the great service your customers rely on. Longevity is after all, the aim of the game. This is akin to a financial risk assessment, which is done to show your areas of vulnerability and the risks attached to them. Some companies use their risk assessment to direct their backup plan, while others just have the plan in place without the assessment. Just to be clear, the backup plan isn’t an alternative to the business you are running i.e. if it doesn’t work out you can always go back to your old job. No a backup plan is for the elements of your business subject to risk and uncertainty, to ensure they keep running if something were to go wrong.
Everybody Needs a Backup, Including You
Leaving your business in the hands of someone else is difficult, but it often needs to be done. Are you so fixed into every aspect of your business that you can’t even take a holiday for fear of it crumbling? Do you need to be consulted before any decision can be made by your staff and is it beginning to wear you down? Good leadership involves effective delegation. If you have competent people working under you (and you should), entrust them with some of the affairs of the business. It is good practise to have someone you are grooming to take over the business. If you intend to keep it in the family and the kids aren’t old enough, you should at least have someone who would be able to manage the business for a considerable length of time in your absence. You don’t have to give the individual full power, but at least enough to run the place effectively.
Backup Your Revenue Stream
Diversification isn’t a dirty word. When you make an investment in the stock market, your broker would either invest your money in a portfolio, or recommend a few companies to invest in. In this way if one company falls short, hopefully the profit from others will counteract it. If your company is making a healthy profit, invest some of the money elsewhere as a way of making more money and hedging any potential losses from your firm.
Another way of backing up your revenue stream is by making use of invoice financing. Not all of your customers will pay their bills on time, but you can get access to at least part of the cash before they do. With invoice financing a company will pay you what your customers owe and then collect the cash from them, and then give you the balance minus their fee. Read more about Invoice Financing on our products page.
Backup Your Suppliers
One benefit of competition is that the prices of goods are remarkably cheaper. If your company relies on only one supplier then you are left very vulnerable to them. If the company should decide to hike their prices or go bust, your business could be in a lot of trouble. If you have different suppliers then you can always toggle between them to get the best deal. However it is beneficial to rely on only one supplier as you could get very favourable rates (depending on the agreement). If this is the case, it is still advisable to have a plan in place just in case it doesn’t work out. Having the competition on speed dial can become useful some day in the future.
Backup Your Records
Good record keeping is important for every business. It helps with budgeting, cash flow predictions and legal affairs (taxes, insurance etc.). Imagine the chaos that would ensue if all your records were lost. It is your job as a business owner to make sure this never happens. Your paper files can be easily destroyed by fire, water or the ever common badly timed shredding. Computer files can be corrupted by viruses or administrative error. Thanks to the recent advancements in Cloud computing, you can save your files safely online. Of course you should also have backups on CDs or a well kept external hard drive and paper files too. If this sounds like overkill imagine what would happen if you lost your entire sales ledger!
For more advice on how to run your business as smoothly and effectively as possible, give us a call today and find out what we can do for you.
This is a guest post from Mark Jefferson of Business Recovery the business turnaround specialists.