20th April, 2021
Crisis management seems to have become a core skill for the modern business owner — how prepared are you in the case of emergency?
Whether it’s lockdowns, earthquakes or like a client of mine in Napier, NZ (the recent flooding), it matters not; business owners need to be prepared for the worst.
What can you do to put yourself in a better position to survive an unexpected crisis?
In order to provide the simplest view of your priorities and how to treat them, I’ve prepared a list of 10 critical considerations when faced with an emergency — before, during and after.
Consider each of the following points now, and how you might be impacted in the case of a natural disaster, and it will help you form your contingency plans.
While your business is of paramount importance, you need to keep a sense of perspective.
Your business will never be as important as your own health and well-being and that of your team. So keep calm and take the necessary measures to safeguard the health and safety of everyone in your business before you do anything else.
No matter how desperate you are to continue your business taking a short-term approach is never advisable as you do not want the bad publicity that comes with ignoring the law.
Take, for example, the disastrous PR some businesses have suffered by making employees come to work when they are supposed to be self-isolating, or when whistle-blowers have reported them for ignoring the rules. Or those who claim wage subsidies but still sack their staff.
It takes a while to build up a good reputation but it’s easily lost. If you feel you may be on the wrong side of the law and public sentiment, it’s advisable to take a step back.
If you are renting, have you kept on side with your landlord and fully understood any clauses in your lease that sets out what happens if your premises cannot be occupied?
Even if your lease is not helpful, many landlords will go beyond the minimum and accommodate their tenants, so talk to your landlord and maybe think about moving elsewhere next time if your pleas fall on deaf ears.
Review your employment agreements and make sure they are up to date and allow for crises. At the very least, make sure you understand what your employment agreements allow you to do in these types of circumstances.
Money spent now to rectify any issues is money well spent.
Take the time to build good relationships with your bankers, financiers and suppliers. It’s good business acumen to fulfil your side of the bargain when dealing with those allowing your business to operate smoothly.
If you’re habitually overdrawn outside your limits with your bankers, ignoring your banking covenants or paying suppliers late, are they likely to support you when you really need their help?
You need to have reasonable financial reserves on one side for that rainy day and ideally you should aim to have three months outgoings in reserve.
If that is not possible, you need to have prearranged unused borrowing facilities that you can draw down if necessary, and that means a conversation with the bank.
If you live on the edge financially when times are good, what chance have you when things get tough? This principle also implies good financial management in both business and personal life.
Keep in touch with customers, clients or patients.
If you haven’t already done so, now is the time to build up a database of customers so you can communicate regularly to let them know what is going on.
It’s a good business strategy to keep in touch regularly anyway, but much more so when you have problems.
What you don’t want to do is find yourself in a position where your key contacts are lost in one fell swoop because they weren’t backed up in some way or other.
If you can’t keep up your payments, it’s important you open dialogue with the relevant government agency (Inland Revenue in New Zealand, Australian Tax Office in Australia) and let them know you’re in difficulty.
Doing nothing and racking up penalties and interest is expensive and just compounds your problems.
This is another clarion call for good bookkeeping — and that means having a system of backups that can withstand fire and flood. While in the past this has meant maintaining multiple physical copies of the key accounts, nowadays online accounting systems like those offered by MYOB take care of that by syncing to the cloud.
Despite its cost, we tend to take insurance for granted. Admittedly, it’s difficult when you’re busy to review your policies and what you’re covered for, and that’s before you consider the time taken to hunt down any alternatives from the competitors.
But when unforeseen events occur, your insurance could be vital, so make sure you know what you are covered for and that you have the best possible policy.
If you have enforced time off, use the time purposefully and don’t just relax.
Think about your business and how you can change things to make it more efficient, leaner and better able to survive crises in the future. In addition, how can you build your business into a more valuable asset, which is less dependent upon your time?
You may not have the resources to maintain a Crisis Response Team, an HR department or non-executive directors, but there are a number of useful things you can do to safeguard your business.
Now is the time to take action, well before the next crisis occurs. If in doubt, seek out professional advice from an accredited advisor.
Do you need individual advice from a professional accountant, bookkeeper or tax agent? NZ-based businesses can start their search for an advisor here, while Australian-businesses can find their local directory here.