The road to success is never straight. There are always curves, potholes, and other obstacles thrown in your path. If you’ve been in business more than, say, a week, then you already know this all too well.

Yet while some problems are little more than inconveniences, others could prove fatal to any business. It could be a fire or natural disaster. It could be the loss of a vital team member. It could be legal issues or an unexpected drop in sales. Or it could be any unfortunate combination of these things.

What can a business like yours do to prepare for the unknown? Put together a solid response plan.

“We work with small business clients of every possible description,” states Shana Peterson-Sheptak, PNC Bank’s Head of Business Banking. “Yet, whether they are a medical practice, or retailer, or construction firm, they have one thing in common: They are optimists by nature. It’s practically required to start a business. However, it’s important to temper that belief in the future with prudence, too.”

Have a Plan B. And One for The Rest Of The Alphabet.

You likely already know the importance of a business plan. It’s the road map that keeps entrepreneurs both grounded and moving in the right direction. At the same time, Peterson-Sheptak points out how it’s a good idea to have a few alternative routes sketched out. Just in case.

“The world of business is filled with ‘what ifs.’ Consider the COVID-19 pandemic, when entrepreneurs everywhere had to scramble. Economic downturns are also a reality. While nobody wants to think about bad things happening, it’s important to at least keep those possibilities in mind as you plan the next several years of growth.”

This doesn’t mean you should be paralyzed by fear, but rather have a contingency plan ready to go, a document that gets periodically reviewed and updated. Of course, the contingency plan won’t account for every possibility, but it makes an excellent starting point.

How To Write A Contingency Plan

It’s a process. And here are our thoughts on how to plan on keeping your business moving forward, no matter what:

  • Identify Risks. What could possibly happen? This depends a great deal on the kind of business you own and where you do business. As one example, are you in an area where severe weather takes place often? Or does your team perform work that’s potentially hazardous? The more you identify risks, the more you can tackle those risks individually with concrete plans of action.
  • Prioritize Risks. Some emergencies are more likely to happen than others. For example, if your business is directly reliant on discretionary spending, then a potential dip in the economy should certainly be near the top of your list.
  • Develop Individual Plans of Action. Now that you’ve identified your risks, how can you mitigate the damage from each? For example, if your business is vulnerable in a weak economy, how do you access sufficient capital for cash flow so you can get through lean times?
  • Keep the Plan Current. Just like your business plan, update contingency plans based on your current business situation. As one example, if your business has grown significantly since you last developed a contingency plan, an update can ensure your financial projections are on target.

“It’s old, but still good advice – make a plan and work the plan,” Peterson-Sheptak continues. “When you’re facing a crisis in your business, the last thing you want to do is wing it. And, as an added benefit, taking decisive action in the face of the unexpected helps create confidence among your employees, vendors, and customers.”

Have The Tools You Need

It’s good to have a plan. It’s even better to have a financial arsenal in place to fight for your business’ life, if needed. This means now is the time to get what you need in place, not start when disaster strikes.

“We’re a responsive financial partner for our small business clients,” adds Peterson-Sheptak. “But you need to keep in mind that the process for receiving a business loan can take days. If you’re facing an emergency, such as a sudden cash crunch and need to make payroll, that’s not a good situation for any small business owner to face.”

In other words, it’s better to have existing credit and not need it. Quick access to capital may prove the difference between surviving an emergency and having no choice but to fold. So, what are your options?

It’s important to have in place a line of credit that allows a business to borrow freely up to preset limits. In the event of a business emergency, a line of credit makes accessing capital as simple as either writing a check on your line of credit or logging into your account.

“A line of credit may give you the flexibility and the financial means to get through a crisis without the additional stress of applying for a loan,” Peterson-Sheptak adds. “Yes, there’s a small annual fee. But that’s really small change compared to having financial options when disaster strikes.”

Another option for funding is a business credit card. Just the same as a personal credit card, a business credit card may allow you to maximize your capital in a hurry—as long as you remain within predefined credit limits.

Considering business insurance should also be part of your mix. Not just to cover losses of inventory or damage to equipment and property, but policies that cover the totality of damages in the event of the unexpected. There is a wide variety of policies available, including:

  • General Liability. Covering harm to others caused by your operations. Some policies also cover issues such as copyright infringement, reputational damage, or product liability.
  • Commercial Property Insurance. For any damages to and on your premises.
  • Worker’s Compensation. In the event of injuries or illnesses incurred on the job.
  • Commercial Vehicle. In case that delivery truck winds up in someone’s living room.
  • Professional Liability. These policies include errors and omissions, damages caused by oversights, misrepresentation, or breach of contract, among others.
  • Cyber Insurance. As fraudsters become more sophisticated, so must your defenses. The costs of responding to a data breach can add up in a hurry.
  • Business Interruption. If a fire or natural disaster shuts down your business, you still have payroll, taxes, and other expenses. These policies may help ensure you have the needed cash flow to keep operating while you get back on your feet.

And those are just a few of the business policies available. It’s important to recognize that your business, your customers, and your risks are unique. With that in mind, make sure that your insurance policies reflect your true business situation and the hazards you face.

Have Good Ongoing Advice, Too

We get it. Entrepreneurs are self-sufficient in ways large and small. But that can-do attitude can sometimes mean ignoring input from others.

A sound business should have a bench of seasoned advisors—qualified professionals who want you to succeed. This may include periodic check-ins with an accountant and an attorney who specializes in small business. Oh, and your business banker, too.

“Our most successful clients? The ones who value having an ongoing dialogue with us,” reports Peterson-Sheptak. “Think of your CPA, your attorney, and your bank as a triangle of trust. A good banking relationship should be more of a partnership than anything.”

One aspect of that partnership should be a periodic relationship review, typically once a year. Peterson-Sheptak suggests that completion of your annual tax returns and financial statements make a good milestone for scheduling an appointment.

“That’s really an opportune time to review the past business year and have an overview of your progress. It gives you an objective voice to help look at the horizon and make prudent moves or shore up any potential weaknesses in your overall business.

“At the same time, a relationship review allows you to have financials already on file with your banker. In the event of an emergency, that will put you one step ahead, including when it comes time to turn around a loan application in a hurry.”

Be Prepared for Almost Anything

You never know what could happen. But when you plan for the worst, equipped with the right financial tools, you can get through the worst.

To learn more about how PNC Bank can be your partner in growth, contact us today. After all, being a small business owner doesn’t have to mean going through tough times alone.