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Business owners often find themselves basking in the glow of success during prosperous times, putting aside contingency plans and allowing complacency to settle in. It is easy to assume that the sun will keep shining – until it does not for your SME.
In business, we must expect and be prepared for the unexpected. How does your business deal with load shedding and water shedding? What would happen if you suddenly lost an important client? Or a business partner? In times of crisis, some businesses die, some survive and others thrive. The crucial differentiating factor is their level of preparedness.
“We do not learn CPR hoping we will use it. We learn it because there is a tiny probability of us using it at some point and that is enough to plan for it,” explains Sandra Beswick, director at financial and strategic advisory company Fluence Capital.
“The same applies to running a business and preparing for whatever may come should form an integral part of every SME’s strategy. Having the right measures in place (always) helps businesses to keep treading water in the toughest times.”
She says this lesson is especially crucial in South Africa’s unpredictable business landscape where businesses of all sizes are scrambling to keep the lights on while weathering economic uncertainty, limited access to credit, spiralling inflation and interest rates, soaring fuel prices and high levels of competition.
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A survey by Deloitte revealed that having a crisis management plan can reduce financial fallout. While 31% of organisations with a crisis plan report that a recent crisis negatively affected their finances, this number jumps to 47% for those without a plan.
“It is clear that proactive action far outweighs a reactive approach. The key to longevity and resilience lies in charting a well-prepared course that accounts for various potential scenarios, even if they never happen. By identifying risks and using them to develop a robust contingency plan, you can empower your company to stay afloat and emerge stronger on the other side.”
There is more to crisis planning than saving for a rainy day. Your crisis plan must consider what could happen, what might happen and even what may never happen. Here are five key considerations to factor into your contingency plan:
The quicker and clearer you can identify your position, the more empowered you will be in working towards long-term business viability. Get answers to these questions:
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Improving risk culture and strengthening the integration of resilience into business strategy processes are some of the most important actions businesses should take. By identifying and assessing the likelihood and severity of the unique risks your business faces, you can take proactive steps to mitigate them before they occur.
Remember the fire drill when the whole school was called to attention to practise safety measures? Schools still do this today and why should your business be any different? Ask yourself: do my employees know what to do during a crisis? A water crisis, a power crisis, a theft crisis, a debt crisis, a client crisis?
Creating a detailed crisis communication plan that outlines how your business will respond to different scenarios reduces misinformation and instability and provides employees with much-needed guidance, safety and clarity.
Your plan should include key messages, key contacts, media relations strategy, marketing strategies, financial saving strategies, internal communication procedures and guidelines for responding to customers and stakeholders. This promotes a culture of accountability and company resilience. Regularly review and update this plan to ensure its relevance.
In 2021, the top reason that start-ups failed was because they ran out of cash, which means that keeping a close eye on your cash flow is vital. “Do what you can to ensure that cash flow is the driving force of your business and maintain a daily cash flow forecast. It is not pretty or fancy b it is the truth and it is a fundamental rule to live by that can help keep you out of trouble when times are tough,” Bewick says.
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Starting and growing a successful SME in South Africa involves time and hard work. Throughout this process, you may require the assistance and guidance of experts, such as legal advisors, funding experts and business turnaround practitioners. Do not be afraid to reach out for help when you need it.
“Too many companies wait until the last minute to seek help and by that time it is often too late. The denial people resort to when facing trouble can be the very thing that renders any chance for a return to viability impossible. The sooner an SME acts to turn the business around with what finances and resources it has, the better its chances of survival,” Beswick says.
While contingency planning can seem like a slog, especially when business seems stable, the truth is that companies must plan for the unexpected. Being prepared for a crisis is a key competitive advantage during uncertain times, empowering leaders with the information they need to make critical decisions.
As the global business landscape continues to evolve, Beswick’s message is clear: “Be prepared. Be resilient. And be empowered with the information needed to make critical decisions in uncertain times. Waiting for the fire alarm may be just too late.”
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