If you’ve guided your small business through the Covid-19 pandemic thus far, you’ve likely learned valuable lessons about business resilience and adaptation along the way. However, even businesses that are now able to sustain a steady cash flow might be wondering how to better prepare for whatever comes next.
The answers aren’t cut and dry. Some small businesses will be more vulnerable to risks like extreme weather events and pandemics than others, depending on factors like their industry, geographical region, or whether they operate mostly online or out of a brick-and-mortar location. Preparing for the future will look different from one business to the next.
That said, there are a few general steps every company can take. These practical measures can help you make fast, smart decisions to more effectively weather the remainder of the pandemic and the years to come.
What is business resilience?
The term “business resilience” simply refers to the ability to withstand unforeseen negative events (such as natural disasters, economic recessions, supply chain disruptions, and pandemics). Because they plan ahead, resilient businesses can more effectively respond and adapt to unforeseen events and minimize the inevitable harms the business faces along the way.
Your business’s “resiliency toolbox” should include a thorough business continuity plan, emergency savings, and an awareness of where to look for additional funding. Equipped with these tools, your small business will have a greater chance of surviving—and possibly even experiencing growth—when disruptive events occur.
Here are several actions you can take now to start building greater business resiliency.
1. Test and Implement a Business Continuity Plan
Business continuity (BC) refers to creating, implementing, and regularly testing systems to help your business quickly resume its critical functions following disruptive events. Generally, your business continuity plan should describe how your business will protect its brand and reputation, serve and communicate with customers, maintain investor relationships, source inventory, restore IT systems, and safeguard employees in the event of unforeseen challenges.
Here is a brief overview of the basic components of a business continuity plan:Risk Assessment
Any contingency planning should begin with an in-depth, realistic analysis of the external risks your business might face, as well as any vulnerabilities within the business itself. These can range from major, high-impact events (such as fires, earthquakes or cyber-attacks) to minor disruptions (such as temporary utility outages, snowstorms or equipment failures).
Assessing the likelihood of these events will help you plan appropriately and allow you to respond quickly if and when they occur.Business Impact Analysis (BIA)
Conducting a Business Impact Analysis (BIA) will require you and your team to inventory all of your business’s activities and determine which are of the highest priority—both in terms of meeting your customers’ or clients’ needs and fulfilling any legal or contractual obligations. Next, you’ll gather data on how these critical functions could be impacted by downtime (such as a supply chain disruption) and establish time-frames in which each function would need to be resumed to minimize financial losses, preserve business value and keep your company in legal compliance.
Understanding the impact of disasters on your most critical business operations will allow you to create effective mitigation strategies. The Federal Emergency Management Agency’s Ready Business campaign provides a Business Impact Analysis Worksheet which can help you get started.Business Continuity Strategies
With the data gathered through the risk assessment and Business Impact Analysis, your team can begin to map out how to maintain critical operations when disruptive events occur. This contingency planning should address how you will communicate with staff, clients and suppliers, source inventory, maintain cybersecurity and provide customer service throughout different crises.
Once you have a BC plan in place, you’ll want to perform test runs each year. This can be simply sitting down with your team and playing through different risk scenarios and responses. Look for holes in the plan, and regularly revise it as your business changes.
For further guidance, the Ready Business campaign’s business continuity planning suite is an excellent resource.
2. Build Your Financial Resources & Awareness
The Covid-19 crisis has made it painfully clear just how important it is for small businesses to improve their financial durability. Another sudden, unexpected loss of revenue may occur in your business’s lifetime, and building your financial resilience can help you to meet expenses and remain operational.
Here are two key ways to safeguard your business in times of financial hardship:Create an Emergency Fund
As a general rule of thumb, a small business owner should have enough emergency savings to cover at least 3 months of operating expenses. Diverting 5-10 percent of your business income towards this rainy day fund will provide a cushion that allows you to navigate tight corners down the road.
If you’re operating on a tight margin but would still like to put money aside for future emergencies, you might consider holding onto more debt in the short term (by reducing or deferring certain payments) in order to add to your savings—or cutting costs where you can. Establishing a prearranged bank line of credit could be another option for improving liquidity if your revenue suddenly falters.Learn About City, State, and Federal Resources
There may be financial resources available for your business at the local, state or federal level in the event of a regional or national disaster. Increasing your awareness of these programs and resources ahead of time will help you to be more empowered (and save you time) when a disruption to your business occurs.
City: Regularly visit your city’s official website and Chamber of Commerce website to check for city-wide initiatives that may provide targeted relief for local businesses, including your own. For example, the city of Charlotte, North Carolina is offering Covid-19 recovery grants to eligible small businesses.
State: By now, many states have set up grant or loan programs to help small businesses affected by the pandemic. In the event of a natural disaster in your state, look to your State’s Governor’s website for small business guidelines and financial assistance programs.
Federal: If your business is impacted by a declared disaster in your region, you may qualify for a low-interest Small Business Administration (SBA) Disaster Loan. FEMA’s Declared Disasters page contains up-to-date information on whether an event in your region has been declared a disaster, and whether financial assistance through the SBA is currently available.
The pandemic will be behind us one day, but it’s possible that your business will be faced with another major crisis at some point in the future—and any steps you take to prepare now will help your business to come through it successfully.
Beyond the steps addressed above—business continuity planning and financial readiness—there are other ways you may wish to develop your business resilience. These methods include strengthening your online presence, diversifying your supply chain and investing in your workforce.
If you wish to learn more about resiliency and business preparation, the US Chamber of Commerce Foundation’s Business Resiliency Workbook is a step-by-step guide that offers an abundance of useful information