worst case scenario

A major shipment is delayed due to a winter storm.

Your database is hacked.

A key team leader is diagnosed with a life-threatening illness.

Your warehouse sprinkler malfunctions and floods your inventory.

What would constitute a disaster in your business?

Most of us are so busy focusing on the day-to-day needs of our business that we don’t have time to think about, much less plan for, an emergency. However, when the unexpected happens, the decisions you make and how quickly you make them can mean the difference between the recovery and the failure of your company.

According to the Institute for Business & Home Safety, about one-fourth of all small businesses in the U.S. fail to reopen after a major disaster.  Major disasters, such as earthquakes and large-scale power outages, are relatively rare. Smaller disasters, such as burst pipes, small fires and server failure, however, happen to small businesses every day. Many companies often prepare for the large-scale weather-related disasters but forget about planning for everyday emergencies, which can be just as devastating. So what can you do now to help you in the event an emergency happens? Here are four steps you can take now:

Four steps how to prepare for the worst case scenario in your Business

Identify the potential problem areas. Gather your key staff members for a brainstorming session. Depending on your type of business, ask each leader to assess the “What Ifs.” What if the power went off for 24 hours? What if our main supplier went out of business? What if our data was compromised?

Identify the events that could happen to disrupt your business. Consider in what areas your business is dependent on other businesses. How could you still service your customers if that supply chain got cut off?  Assess other factors that could keep your business from running smoothly.

Next determine as best as you can the likelihood of each “what if” happening. Rank them in order of possibility and consider what actions you need to take to have a back-up plan for each one. What steps do you need to take to minimize your risk?

The steps you come up with may include anything from enhanced safety procedures, to better alarm systems, to better file back-up systems for your computers, to more frequent maintenance of your equipment.

Develop an emergency plan.  Now that you have identified where crises could occur, you need to get a plan in place. This plan does not have to be an extensive document, but it does need to include who is in charge of what area of your business and all the contact information for each person. Outline the chain of command for each contingency.

Distribute the plan to everyone who needs it and keep it up to date as staff members and duties change.

Consider all forms of contact, since in some emergencies all communication means may not be working.

If some of your service providers are off-site, such as an IT provider or a website host, be sure to pull them into this process.

Train your staff. An emergency plan is useless is it is buried in an employee handbook, and it has never been tested. No matter how big or small your business is, it is important that you discuss and test your emergency preparedness.

Have a detailed set of instructions describing how your business functions, including who is responsible for what tasks, security passwords and all contact information for key vendors. Then store this document in a secure location outside of the office at a place you and your managers can easily access in an emergency.

Make it a regular part of the way you run your business to train your staff on how to handle the “what ifs” of their department or area of expertise.

Make “small regular deposits”

On Jan. 15, 2009, US Airways Flight 1549 was just two minutes into its flight when flock of geese flew into the aircraft causing both engines to fail. The plane fell into the freezing water of the Hudson River at 150 mph. All 156 passengers survived.

Captain Chelsey “Sully” Sullenberger said in a television interview the next day that although the emergency was definitely unexpected, he was not unprepared.

“One way of looking at this might be that for 42 years I’ve been making small regular deposits in this bank of experience, education and training,” Sullenberger said. “And on January 15, the balance was sufficient so that I could make a very large withdrawal.”

How can you make “small regular deposits” for your business?

Is your organization dependent on a relationship with one banker? What if that person leaves the institution or if that bank’s policies change? Think about forming a relationship with more than one bank so that your business is not hurt by an unforeseen change at one institution.

Consider building a cash savings fund to cover short-term expenses for a few months. If you can cover payroll and supplier costs from that reserve on a temporary basis, it could keep your doors open when the unexpected strikes.

Make sure your insurance policy is up to date for your company’s current needs. Have at least an annual review of your coverage, realizing that your initial coverage may not be enough if your business has been expanding. Ask your insurance agent about policies that may be of particular benefit to your industry. For example, would you be protected from employee theft?

According to the Small Business Administration, 90 percent of companies fail within a year unless they can resume operations within five days of an emergency. Having a plan in place can ensure that you’re back in business quickly and able to stay in business.

For more information and ideas, visit http://www.preparemybusiness.org.