After almost every major company crisis, business owners say to themselves, "If only I had done X." Sometimes these were things they knew they should be doing but let slide. Other times, there was an unforeseen disaster that could have been mitigated by having certain safeguards in place.
Between my own and those of my peers, I've seen a lot of mistakes with big consequences for a business's well-being. Here are four ways business leaders can protect their companies from life's more unpleasant surprises.
1. Have Adequate Insurance For Risk
Insurance costs a lot, and sometimes you only carry it because your clients need to check a box on vendor coverage. Yet one thing about business insurance is certain: You're very grateful to have it when you need to file a claim.
That doesn't always mean that more coverage is better. The most important thing is to have adequate insurance to cover your vulnerabilities. If your entire business would shut down with a single ransomware cyberattack, for example, you should look into cyber insurance policies.
Or if your product shipments are delayed months because another barge clogs up the Suez Canal, those losses can be mitigated. An example of this would be SRA 831(b) Admin that does an 831(b) Plan. This is essentially a tax-deferred war chest for a business's risks that fall outside of traditional insurance. Some of these resources used to be more focused on larger businesses, but companies are appearing that can give similar resources to small businesses and entrepreneurs.
2. Get It in Writing
Sealing a deal with a handshake conveys trust and can make a great start to a business relationship. But sometimes a simple miscommunication or difference in memory can cast doubt on the details of that handshake deal. So even if you're worried about insulting the other party, get all agreements down in writing.
This goes double for friends and family. Going into business with someone you know well isn't something to be done lightly. I don't know how many times I've seen colleagues experience damaged relationships because an arrangement wasn't documented and therefore got misinterpreted by one or both parties. A written agreement can save future family dinners if your brother is a vendor for your company.
3. Build and Maintain Helpful Relationships
That's not to say you should shun close relationships in business. Sometimes when unexpected disasters arise in your company, you really have to reach out for help and advice. You may need a mentor to give you some guidance or a peer who can do you a favor. In times of crisis, those can be the lifelines that can boost or even save your business.
Of course, to build these relationships, you need to benefit others as well. Many times I have solidified relationships by agreeing to speak last minute at an event where the originally booked speaker canceled. Being willing to ride to someone else's rescue builds goodwill among your contacts and peers. That can really save your bacon when trouble arises and you're the one who needs help.
4. Keep Cash Reserves
If business is going well, it's tempting to spend generously on expansion, perks, or exciting new business ventures. Short of potentially earning a little interest in a money market account, keeping large cash balances might seem like a waste.
Unfortunately, when businesses run lean on cash reserves, the unexpected can really throw them for a loop. The whole world found that out when the pandemic hit in 2020. We had to have enough cash reserves to keep our staff on even if income were to disappear entirely. Thankfully, it didn't come to that, but having those cash reserves would have been vital if sales had tanked. Remember, not every crisis will come with a PPP loan to save you.
As the events of recent years have shown, disaster can strike when business owners least expect it. Some of these disasters may even be self-created. Whether you're bracing for a recession, a severe weather event, or a supply chain snafu -- or simply trying to avoid committing an own goal -- there are ways to cushion the blow. Establishing the right safeguards ahead of time can help your business survive whatever the world dishes out.
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