Continuity Planning for Small Businesses: A Complete Guide
Updated: Sep 24, 2019
Small businesses are often the last to plan for resiliency when crisis and unfortunate incidents occur in the enterprise. According to the Institute for Business and Home Safety, almost 25 percent of businesses fail to recover after a crisis. Whether it is a cyber security attack or a natural calamity, an unprepared business always faces a high risk of folding when tragedies strike often at the expense of all employees as well as stakeholders.
As a business investor and turnaround strategist, I have worked with many businesses with revenues of at least $1 million annually. Yet, many of these “experienced” owners upon our first encounter would admit that they’re clueless in terms of transitioning their business as retirement nears.
It’s easy to diagnose the situation. But it’s a common problem among small and medium businesses in the United States. A survey by the Federal Emergency Management Agency (FEMA) reveals that 1 out of 5 companies don’t spend time maintaining their business continuity plan. The result? Around 40 to 60 percent of these small businesses fail within three years, and most receive far less when they sell.
What is a Continuity Plan for Your Small Business
There is no denying the truth: Small business owners cannot become complacent about operating at the threat of operational interruptions. With a business continuity plan, an enterprise can be prepared to answer these questions:
How will the business handle the sudden death of the CEO or COO?
What if a top executive is embroiled in a public controversy and is forced to leave his position in a matter of days?
How will the company continue to serve customers when there’s a long term illness of a key executive?
How will your company’s bottom line be impacted when a computer virus hits your business-critical data?
Who will take over a critical project when staff is slashed due to budget cuts?
By having a detailed action plan, a business can easily identify the required resources, the strategy and the stakeholders that will be involved in recovering in cases of unanticipated natural or man-made incidents. In addition, the company is most likely to prevent the negative impacts of a crisis by continuing to deliver critical products or services to meet the demands of the market.
With such plan in place, a business projects a proactive attitude on its survival whether in cases such as data breach, fraud or natural calamity. Thus, by meeting its obligations to customers, employees, the government and the public in situations that could derail their operations or tarnish its image in an instant, an enterprise, no matter what size, is ready to move forward against any circumstance.
Why You Need a Business Continuity Plan
Small businesses are more prone to failure, especially in cases that demand their leaders' decision in mitigating specific risks. Thus, any business disruption can cost the business a lot of money when the organization is caught unaware. In most cases, the financial impact is so severe that it eventually withers on the vine.
While creating a continuity plan is often recommended to company leaders, they often complain that the process consumes much of their time and resources. However, when an event that they once thought would not happen occurs, it's already debilitated the organization. So even if yours is a small business, preparing a continuity plan has its valuable payback in the future.
You need a business continuity plan to:
ensure employee and customer safety in times of organizational chaos
prevent the risk of losing customers
identify damage prevention strategies
reduce the opportunity for fraudsters to pursue their schemes because a strong corporate leadership is already observed
be able to prove to legal authorities that your company has employed disaster planning practices so damage to employees, stakeholders and most especially customers is minimized
Any potential threat, therefore, is best met with adequate preparation through the plan.
When Do You Need a Business Continuity Plan
First, every organization, whether a small, medium or large enterprise, is at risk from potential threats such as:
natural calamities (earthquakes, floods, storms, blizzards, fire)
Along with a disaster recovery strategy (which is a subset of business continuity), enterprises need to ensure that essential functions remain available during and after a disaster until the process of recovering is completed.
Second, every business must be able to identify its threats and weaknesses ahead of time. With systems in place, the impact of any threat is minimized and guarantees that operations are restored quickly.
Finally, it reduces your operation’s downtime. By having a well prepared plan, each employee is made aware of his or her own role and is prepared to takeover assigned roles when other members are unable to perform their duties.
What are the Components of a Business Continuity Plan
These critical components must be included in any business continuity plan:
The duties and responsibilities of each member of the organization during a disaster or crisis must be stated.
Internal and External Risks
All threats are identified and categorized according to risk level.
All action plans for each threat or risk must be stated in detail including relocation facilities and backup systems.
All communications strategies (internal and external) must be explained to allow announcements and messages to be disseminated fast and properly through appropriate channels. Contact numbers and addresses of stakeholders must also be listed.
Outlines how the plan will be tested through training sessions involving all members of the organization.
Since new threats arise every now and then, a dedicated team will have to update the business continuity plan regularly.
The business continuity plan is ideally organized into the following general sections:
Policy, purpose, and scope
Goals and objectives
Key roles and responsibilities of Teams and Personnel
Business impact analysis (BIA)
Risk prevention strategies
Business continuity strategies
Plan Testing and Exercises
Maintenance and Auditing
Truth be told. When disaster strikes, it’s most likely that a company will cease its operations, more so for small businesses with limited resources and capital. Brief service or operating disruptions can tremendously affect the entire organization. However, by planning early to meet the challenges ahead, the negative impacts can be greatly minimized.
While small business owners are known to prioritize profit, market share and customer satisfaction, the necessity of preparing a detailed business continuity plan shouldn't be neglected. Ensuring access to resources and keeping operations going in the face of disaster, threat or risk can only be possible with a plan.
With a holistic view of the organization's goal of surviving, a business continuity plan ensures a smooth recovery process in the face of chaos.
Brett Pittsenbargar is a savvy business investor and turnaround strategist dedicated to assisting business owners reach their objective at every growth phase. With a background in business development and investment experience, Pittsenbargar understands that business is much more than written contracts, it is about the people working every day in the business that matter most for small and medium sized enterprises generating $1-20+ million in revenue annually. He invests in, mergers and acquisitions, growth partnerships, cash out purchases and adding shareholder value.
Consult with a seasoned business investor that has decades of experience helping small and mid-sized businesses. A business strategist who can work directly with you in developing exit strategy plans, partnering growth partnership, building shareholder value and organizing mergers is critical for your business. Contact Growth Point Holdings today to arrange a one-on-one consultation with a dedicated business strategist to start building a synergistic long-term business relationship together.
Disclaimer: This article is intended to give you general business information, not to provide specific legal or financial advice. Be sure to consult your attorney, accountant, and financial professionals for any specific questions relating to your business.