Entrepreneurs don’t set out to fail. They stay positive, expecting the best to happen and that everything stays on course. However, things sometimes don’t go as planned, hence the need for a contingency plan as an entrepreneur.
Contingency plans always come in handy, because unexpected situations can interrupt the launch of a business and disrupt normal operations. Without a proper contingency plan in place, the health of your business will be affected and it could gradually lead to insolvency, especially for SMEs and early-stage startups.
A contingency plan can be the difference between your business going bankrupt or phasing out of the market place and surviving the storm. A contingency plan documents your course of action and proactive strategies in times of crisis that threaten the stability of your company. This strategy plays a significant role in business continuity, risk management, and disaster recovery.
So, let’s build a contingency plan before this article goes haywire – at least we would have something to fall back to. (Lol)
See Also: How to start a successful mini-importation business.
How To Prepare A Contingency Plan As An Entrepreneur
In preparing a contingency plan, you need to consider the following:
1.) Analyze Your Risk
When building an effective contingency plan, a lot of research and brainstorming has to be put into work. You have to analyze and list the major events or circumstances that could have an adverse effect on your business.
At this point, you are allowed to think negatively. Predict the moves for the devil and analyze not just the pros, but the cons. The risk analysis should be done on the key resources, such as employees, machines, IT systems, etc. More so, involve other team heads, subject experts, and even outsiders like business consultants to get a deeper understanding of things that could be a clog in the company’s wheel of progress.
Note that, as an entrepreneur, risk analysis should not be exclusively your call, it should be all-inclusive – get everyone’s opinion for a balanced viewpoint.
2.) Scale Of Preference
The risk that affects my sales are more critical than the risk that affects my product development, or even operations. When analyzing these risks you have to pay close attention to the order at which they pose a threat to your business.
Immediately you have created a list of all the possible risks that could occur in different areas of your business, start prioritizing them based on the threat they pose. This will help you to be organized when implementing your contingency plan.
For each of the threats, you should:
- List the strategies and techniques you will use to minimize the risks
- Detail the techniques you will use to mitigate the financial impact of the risk if it should occur
See Also: Retail business ideas you can start now with low investment and make money.
3.) Execute The Plan By Delegating Responsibilities
A role-play strategy is one of the best ways to prepare for what you can term ‘the unknown’. You have to simulate circumstances and act based on the resources at your disposal. In a nutshell, you have to consider who does ‘what’, when ‘this’ happens.
Who exactly, or what department will be responsible for executing a particular aspect of the contingency plan. Also, a mapped out plan should be put in place for those with access to the documents needed to act upon the plan before and during the process.
4.) Revenue Generating Model For The Plan
When the chips are down, where will the money come from? Contingency plans can sometimes be capital intensive. They hit your financials like any other capital intensive project, so as an entrepreneur you have to think about where the money for implementing the plan will come from.
Knowing that it’s difficult to access credit when the chips are down, you have to make sure you have some emergency funds for the execution of your contingency plan. I know that it is easier said than done, however, you have to prepare for days that will go against the tide.
5.) Update Your Contingency Plan
Some types of risk are constant, while others can be dynamic. They change in different phases and stages of your business. Since the type of risks businesses face change at different stages of their development, you have to stay abreast of the changes with respect to your risk analysis.
An entrepreneur stays ahead and makes sure he isn’t caught off guard. There can also be changes to market conditions that expose the business to new and previously unidentified threats, so keeping your contingency plan updated is the best way to checkmate the situation.
Also, to make sure the financial contingency plan is relevant and up-to-date. It’s essential you revisit and revise the plan on a quarterly basis as the business grows.
What is the contingency planning process at your organization? Let us know in the comments section below.
Are you thinking of the right business to venture into? We have a researched guide that contains the 35 most profitable business ventures in Nigeria. Get it today and thank us later.
Let’s create visibility for your brand today and put your business on the world map. Contact us today to make your brand the preferred choice among our audience of entrepreneurs and business leaders.
To keep track of our activities, follow us on Instagram.