When I was 10 years old my mother kept two five-gallon bottles of fresh water under the sink. On my birthday in October I got a flashlight. She, like many other families, was making a contingency plan. Oh…This was during the Cuban Missile Crisis.
Times have changed, but the unexpected still happens…and usually happens fast! If you are in a small business you may want to consider a contingency plan.
Small businesses need to have a cash reserve for those things that just happen….burst water heaters, broken windows, flood cleanup, and even man-made calamities such as theft, vandalism, or more commonly, loss of business income due to weather or other forces beyond your control. A good rule of thumb is to allow an extra 10% of your non-salaried expenses as a contingency (or 5% at the very least). In addition, be sure that your business insurance has provisions for business interruption. Also as a savings, increase your deductible amount to as high as you can self-insure. This will reduce your overall insurance cost, yet still give you needed protection.
What would you do if your business was destroyed by fire or flood or if your roof caved in due to the weight of abnormal snowfall? If your business is heavily dependent on the internet, are you using an off-site backup? Or better yet, an off-site hosting service with ultra-high security? If your business ships a lot, do you have an alternative point of shipment? Will your vendor drop ship for you until you are back on your feet? Business interruptions are always hard, but can be minimized by some planning when things are going well and it’s business as usual. Just look at Egypt if you don’t think things can change in short order.
Also on a personal level, have you set up your will? What succession planning have you done in your business? These are all good questions for both young and old to ask themselves. It does take a little time and thought, but just knowing that your life plan for business and family is in order will give you a boost of confidence.
Robby Meadows, President