If you already have a disaster strategy in place for your business, congratulations! Yours is one of the few that does.
What do we mean by a disaster strategy? Think for a minute about the worst thing that could happen to your business today? Or tomorrow or the next day or a week or a year from now?
Have you considered the implications of that crisis? Have you derived strategies to deal with whatever happens?
Being prepared for worst case scenarios means you have a Plan B.
Let’s assume you have one client that represents 60% of your company’s business volume and, because that client loses a government contract, they have to end your relationship and cancel your pending orders. What do you do?
Odds are you have to scramble to replace that loss of business. That means:
- pushing the sales force to close more deals;
- driving potential customers to get off the fence and commit;
- trying to expand work orders from the other 40%;
- perhaps reducing the work force temporarily;
- finding another buyer for the materials you’ve already ordered;
- potentially suing the client for outstanding order fulfillment;
- offering incentives to potential customers to come on board; and,
- increasing your marketing and advertising exposure, among other tactics.
So what should a Plan B look like?
Take a look at your industry and come up with a ratio of what percentage of your business should be devoted to one customer. By taking the time to think it through, you will most likely come up with the answer on your own. The key is to find a natural balance that maintains cash flow while sustaining strong customer relations. It could be 100 customers who each represent one (1%) percent of your business, ten that each account for 10%, four that are 25% each, or thousands that account for miniscule percentages of your overall business volume.
Think about the pitfalls and benefits of each scenario, and the multiple variations.
From the crisis perspective, losing one of those 100 customers only impacts one percent of your business while losing one of the four means a fourth of your business is lost. It would probably be much easier to add one percentage point to one of the other 99 customers than to get one of the remaining three (or all 3) to pick up the difference from losing 25% of your business. If you’ve got thousands of customers, what contingencies are in place for dealing with a major product recall or harmful defect? Improper action could have a significant impact on your customer’s loyalty.
The actual disaster you plan for may never happen to your business, and that’s okay. By taking the time to think through the repercussions and responses, you consider variables and prepare for actionable contingencies. It’s a process that prepares you for events beyond your control. Whatever they may turn out to be, you can cope with the consequences much more easily.
It is wise to review your disaster strategy occasionally, depending on the potential severity of the impact a crisis could have on your business. What do you do if your building catches fire and employees are hurt? What if flooding occurs or a tornado strikes? How do you react if there’s a groundswell of negative publicity about your company in the social media outlets? How do you handle a shareholders’ takeover attempt?
Diversifying your product line or adding additional services can also be part of your Plan B. When you have a single service or product, your company is exposed to market swings, economic downturns, consumer trends, and a myriad of other factors that can impact your business.
Plan B may also be a long, hard look at your financial status, a frank discussion with bankers, accountants, investors, and shareholders and taking steps to sell or close the business. Obviously, if the conditions are poor, selling may mean only minimum offers.
What happens if a trojan horse virus or malware shuts down your entire computer system – order processing, client records, and everything is contaminated? How long will you be down, or technically out of business? This is less of a treatise on the importance of backing up your data as it is on having a plan in place to deal with this potential crisis.
Brand Irons can help you put together a comprehensive disaster plan or crisis management strategy. Call us at (920) 366-6334 for an engagement consultation.