Connect with us

Entrepreneurs

Crisis-Proof Your Business Now: Essential Strategies for Every Entrepreneur

Around one in five U.S. businesses fail within a year of opening their doors, with around half closing in five years.

Published

on

how to be prepared for a crisis in your business

Every business of any size in any industry will experience a crisis at some stage. Sadly, the majority don’t survive. Around one in five U.S. businesses fail within a year of opening their doors, with around half closing in five years.

Crises can come from any avenue. Whether it’s the global COVID-19 pandemic that caused 9.6 million job losses, a natural disaster, or a cyberattack, you need a plan for negotiating challenging times.

Here’s how to develop a workable crisis management plan for your small business.

What is a Crisis Management Plan for Small Businesses?

Crises come in many forms. Some of them may be self-made, and others could be unavoidable. According to the U.S. Chamber of Commerce, 595,000 businesses close their doors each year. How you manage a crisis will define whether you emerge from it.

Small business crisis management is the strategic process of identifying crises, preparing for them, and having an action plan that comes into force after a crisis is triggered. Common examples of action plans for various disasters include: 

  • Natural disasters
  • Cyberattacks
  • Lawsuits
  • Product sabotage
  • Labor shortages

Benefits of Crisis Management Planning

Resiliency is a priority for business leaders today. According to PricewaterhouseCoopers (PwC), 89% of business leaders claimed resiliency was a key priority. But that doesn’t mean businesses are acting on those priorities sufficiently.

For example, only 49% of U.S. businesses have a formal crisis communication plan. It illustrates the gap between talk and action. So, why should you invest in crisis management planning?

  • Minimize downtime
  • Reduce financial losses
  • Give your employees confidence
  • Protect your reputation
  • Swift resumption of day-to-day operations

8 Steps to Creating a Crisis Management Plan for Your Small Business

Where do you begin with crisis management planning?

Ground zero is acknowledging and acting on the need for a crisis management plan. If you’re ready to take action, follow these steps.

1. Form a Crisis Management Team

The first step is to divide responsibility. Who should form part of a crisis management team? This goes beyond designating somebody to provide information and support.

Ideally, a crisis management team begins with your senior management team. Likewise, this should include somebody from every department. You may also want to select an ordinary employee to act as a conduit between the top and bottom of your organization.

2. Identify Crises

What constitutes a crisis for your organization?

Most businesses have much in common regarding the type of crisis they may encounter. No business is immune from cyberattacks or industrial action. On the other hand, some risks may be so remote that they’re not worth spending undue time on.

For example, if your business is in Florida, natural disasters like hurricanes are a significant crisis. But a business in a rural town of a few thousand people in Wyoming probably doesn’t need to worry about international terrorist attacks.

Conduct a SWOT analysis to determine which risks your business is likely to encounter and the likelihood of them coming to bear. Additionally, you should assess the general impact of such a crisis and how prepared your company is currently.

3. Break Your Crisis Management Plan Into Four Phases

Most businesses only act when a crisis has already revealed itself. Unfortunately, on-the-fly thinking can only accomplish so much. As part of your plan, it’s wise to break each crisis response down into four stages:

  1. Pre-Crisis – This is the planning phase. It’s the time spent putting in safeguards for potential disasters. It may include forecasting a crisis or taking out a comprehensive insurance policy.
  2. Latent Crisis – What happens during the early signs of a crisis? The focus is on communication and information sharing to help all stakeholders be proactive.
  3. Acute Crisis – Crises that cannot be contained, like a natural disaster, will enter the acute crisis phase. This is where businesses must have a plan for taking evasive action.
  4. PostCrisis – Crisis management planning doesn’t end with the crisis itself. It also includes the recovery stage. Projecting best-case and worst-case scenarios can show you what your business must do to bounce back quickly.

These four stages are what crisis management plans are, but they can simplify communication and coordination by breaking them down into these distinct categories.

4. Formulate Individual Response Plans

Classifying each threat and the likelihood of it manifesting enables you to prioritize.

Preparing individual response plans means determining how to mitigate those risks, or at least the damage. This may include building up your cash reserves, shifting to temporary remote working, or creating prepared statements for customers and other stakeholders once a specific crisis has been triggered.

5. Think About Your Insurance

As part of effective crisis management, it’s essential to consider the role of insurance. It is a fundamental tool that can mitigate the financial impact of various crises.

Various types of crises necessitate diverse insurance coverage. For instance, liability insurance for your small business can help safeguard your company in the event of accidents or injuries caused to third parties, while property insurance can shield against damages from natural disasters like fires or floods.

Identify potential risks associated with your business operations and ensure you have adequate insurance coverage for each. Regularly review your policies to make sure they are up-to-date and in line with your current business needs. It’s also a good idea to understand the claims process for each policy so you can act quickly when a crisis occurs.

Remember, insurance is not a solution to prevent crises, but rather a safety net that can help your business recover and continue operations during challenging times.

6. Develop Your Communication Plan

Communication is everything because confusion is one of the most significant crisis issues. If your employees and customers don’t understand what’s happening, it creates unnecessary panic.

Building a communication plan and a system for disseminating information can help keep calm heads. Some tips for a crisis communication plan include:

  • Creating templated statements early.
  • Designating someone to distribute information throughout all channels.
  • Be accurate and fast.
  • Prioritize who to communicate with first. Ideally, this should be your customers.
  • Construct a schedule for updates on an unfolding crisis.

7. Formulate a Recovery Plan

Building and role-playing your emergency response plans is one thing, but how will you recover from that crisis?

Your recovery plan depends on the crisis in question. For example, if your servers go down during a time-limited sale, your recovery plan may involve refunding customers or giving them a bonus to prevent bad press.

Recovery plans focusing on natural disasters may include knowing where your offsite server backups are and who’s responsible for bringing your systems back online.

Ideally, you should have recovery plans based on the absolute worst-case scenario.

8. Revisit and Update Your Crisis Management Plans

Planning for a crisis and locking it up somewhere is not enough. Getting out of a crisis means up-to-date solutions that reflect the world as it is at the time.

Review your small business disaster management and continuity plans every few months. This will help you to identify emerging blind spots, bridge gaps, and include the most accurate information.

Although this might seem like a hassle, reviewing your plans every so often shouldn’t take long. After all, if you’re staying on top of the situation, any changes you must make will likely be minimal.

Build a Resilient Business to Withstand Any Disaster

Nobody wants to think about the worst-case scenario, but burying your head in the sand isn’t an option. Small businesses are more vulnerable because they possess fewer resources to manage crises.

Early planning and building a streamlined disaster management plan can spell the difference between survival and failure. The sooner you address your crisis management plan, the better because disaster can strike when you least expect it.

Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Entrepreneurs

How Entrepreneurs Are Harnessing LLCs to Launch Successful Startups

LLCs have unique advantages for starting up and growing a successful business

Published

on

why you should set up an LLC

In my entrepreneurial journey, I’ve learned that LLCs have unique advantages for starting up and growing a successful business. But, before delving into the advantages, it’s essential to grasp the fundamentals of what an LLC is and how it operates. 

What is an LLC?

An LLC is a hybrid business entity that combines the liability protection of a corporation with the pass-through taxation of a partnership or sole proprietorship. This unique blend provides entrepreneurs with the best of both worlds: personal asset protection and simplified taxation.

One of the most significant advantages of an LLC is its limited liability feature. This means that as the owner, my personal assets are shielded from any liabilities or debts incurred by the business.

In the event of lawsuits or financial obligations, only the assets of the LLC are at risk, offering me peace of mind and protecting my personal wealth.

Advantages of Forming an LLC

Flexibility in Management and Structure

Another aspect of the LLC that appealed to me was its flexibility in management and structure. Unlike corporations, which have rigid hierarchies and formalities, LLCs allow for a more relaxed approach to governance. As the founder, I have the freedom to structure the company in a way that suits the needs and goals of my startup.

For instance, LLCs can choose to be managed by their members (owners) or appoint a manager to oversee operations. This flexibility enables me to maintain full control of the business or delegate management responsibilities to trusted individuals while retaining ownership.

Additionally, LLCs are not bound by strict meeting requirements or extensive record-keeping obligations, reducing administrative burdens and allowing me to focus on building and growing the business.

Pass-Through Taxation and Financial Efficiency

One of the most attractive features of an LLC, particularly for startups, is its pass-through taxation. Unlike corporations, which are subject to double taxation (taxation at both the corporate and individual levels), LLCs pass profits and losses directly to their members’ personal tax returns.

This tax efficiency not only simplifies the filing process but also allows for greater flexibility in managing cash flow and reinvesting profits back into the business. As an entrepreneur, minimizing tax liabilities and maximizing financial efficiency are critical components of long-term success, and the pass-through taxation feature of an LLC aligns perfectly with these objectives.

Enhanced Credibility and Professionalism

Establishing an LLC can also enhance the credibility and professionalism of a startup. Unlike sole proprietorships or general partnerships, which may be perceived as informal or less legitimate, an LLC provides a formal business structure that instills confidence in customers, investors, and partners.

By operating under the umbrella of an LLC, I can present my startup as a reputable and established entity, which can open doors to opportunities such as securing financing, attracting top talent, and forging strategic partnerships.

This enhanced credibility can be a significant advantage, particularly in competitive industries or when seeking to differentiate my startup in the market.

Protection of Intellectual Property and Brand Assets

For startups built around innovative ideas or unique intellectual property, protecting these assets is paramount. An LLC offers an additional layer of protection for intellectual property and brand assets, safeguarding them from infringement or unauthorized use.

By registering trademarks, copyrights, or patents under the name of the LLC, I can establish legal ownership and enforce my rights more effectively in the event of disputes or infringement claims. This protection not only preserves the value of my intellectual property but also enhances the overall stability and longevity of the startup.

Steps to Form an LLC

Let us now look at the general steps to form an LLC for your business:

Step 1: Choose a Name for Your LLC

Selecting a unique and distinguishable name is the first step in forming an LLC. Ensure that the name you choose complies with the rules set by your state’s LLC division. Typically, the name must end with “Limited Liability Company,” “LLC,” or an abbreviation of these terms.

Additionally, the name should not infringe on the trademarks of existing businesses.

Step 2: Designate a Registered Agent

A registered agent is an individual or entity appointed to receive legal documents, such as lawsuits or subpoenas, on behalf of the LLC. The registered agent must have a physical address within the state where the LLC is formed.

For instance, if you are forming an LLC in Texas, ensure that your registered agent has a physical address in Texas.

This role is crucial for ensuring that the LLC remains compliant with legal requirements and maintains good standing.

Step 3: File Articles of Organization

The Articles of Organization, also known as a Certificate of Formation or Certificate of Organization in some states, is a document that formally establishes the LLC. You’ll need to submit this document to the appropriate state agency, usually the Secretary of State or Division of Corporations.

The articles typically include basic information such as the LLC’s name, address, registered agent details, and the purpose of the business.

Step 4: Create an Operating Agreement

While not always a legal requirement, drafting an operating agreement is highly recommended for LLCs. This document outlines the ownership structure, management roles, voting rights, profit-sharing arrangements, and other important aspects of the LLC’s operations.

Even if you’re the sole owner of the LLC, having an operating agreement in place can help clarify expectations and prevent disputes in the future.

Step 5: Obtain an Employer Identification Number (EIN)

An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to identify your LLC for tax purposes.

Even if your LLC doesn’t have employees, obtaining an EIN is necessary for opening a business bank account, filing taxes, and conducting other financial transactions.

Step 6: Obtain Necessary Permits and Licenses

Depending on the nature of your business and its location, you may need to obtain various permits, licenses, or certifications to operate legally. These requirements can vary widely from one industry and jurisdiction to another. Common examples include business licenses, zoning permits, health permits, and professional licenses.

In my entrepreneurial journey, the decision to establish my startups as LLCs has been instrumental in mitigating risks, optimizing financial performance, and positioning my ventures for long-term success.

By harnessing the advantages of the LLC structure, I’ve been able to navigate the complexities of entrepreneurship with confidence and resilience, laying the groundwork for a bright and prosperous future.

Continue Reading

Entrepreneurs

Build a Strong IT Team with These Smart Hiring Tips

Without dedicated IT staff, your company may not be able to function as efficiently or effectively

Published

on

Hiring tips for tech industry

The role of IT staff in your company is not only essential but also ever-evolving. As your business grows, so does the need for qualified IT staff and more robust recruiting solutions.

After all, from maintaining and troubleshooting the computer systems that keep your business running smoothly, IT staff also help employees stay connected and productive by providing technical support at all times. (more…)

Continue Reading

Entrepreneurs

5 Important Legal Tips Every Entrepreneur Should Know

With a firm commitment to legal knowledge, you pave the way to grow your business sustainably

Published

on

legal tips for entrepreneurs

Embarking on the entrepreneurial path is a courageous venture that calls for a diverse skill set to achieve enduring success.

While creativity, drive, and strategic vision are paramount, integrating legal insight into your entrepreneurial toolkit can be a game-changer.

This comprehensive guide delves deeper into the five critical steps that can empower you to navigate the intricate legal landscape and propel your venture toward prosperity. (more…)

Continue Reading

Entrepreneurs

6 Hacks to Boost Your Productivity as a Business Owner

To improve how much you get done each day, it’s smart to establish routines and use careful planning

Published

on

productivity for business owners

Entrepreneurs are always looking for ways to get more done with the time and resources they have. Business owners can use clever productivity tricks to break these limits and make the most of their projects. (more…)

Continue Reading

Trending