The Old Magic 8-Ball Is The Best Way To AVOID Business Disaster
Okay, I'm not literally advising the use of a Magic Eight Ball as a business management strategy...just something close.
Most folks seek business management assistance only after issues actually arise and require unique or immediate resolution. This is how 90% of business owners and managers deal with problems.
BUT, what if there was a better way? What if you could avoid or reduce the severity of an issue by preparing for it ahead of time?
Business owners have a laundry list of things to do each day. There’s never enough time to accomplish everything on the ‘to do’ list. Increasing sales, improving marketing, managing employees, or satisfying customers all rank high on the priority list. However, mitigating the effects of a potential business problem BEFORE it arises never seems to make the cut.
This underutilized exercise is what we call RISK PLANNING. Risk Planning allows you to deep-dive into problems and root causes without the real-time pressures that often accompany real-world issues. Haven’t we all hired the “good enough” applicant to fill the urgent staffing need because we couldn’t wait any longer?...or agreed to suboptimal customer terms because we needed the cash flow now? Good news friends…there’s a better way.
What Is Risk Planning?
Risk Planning is identifying the most common and severe risks a business can/will face to create the best response AHEAD of time. Risk Planning is a type of business war games where you identify potential business risk scenarios to develop the best response or risk mitigation ahead of time. To start, business owners and management teams should list the potential threats and effects (most common and severe) for their business. Since each business is unique, a “one-size fits all” solution cannot apply. Then the team can brainstorm the best response to each situation.
Here are some common issue areas to get your Risk Planning exercise started:
Equipment: How will you deal with an urgent “line down” situation if a critical piece of equipment breaks? Can you establish a reserve cash account, so cash is available (at least a down payment) when the need arises? Can you establish an emergency line of credit with the equipment distributor?
Tier 1 Supplier(s): Whether inventory is needed for resale, used in a business service, or needed for manufacturing, business should not come to a halt because of supplier/vendor problems. Can you establish multiple sources? Can you obtain guaranteed service levels from the current supplier?
Sales Volume: Although most organizations have a constant focus on sales, what will you do if sales volumes differ significantly from trends or expectations? A drastic INCREASE in sales can be just as problematic as a major decrease in sales. What actions will you take? How will you try to root cause the situation?
Competitor Landscape: Few monopolies exist in today’s business world, so businesses must be prepared for changes in the competitive environment. In most cases people focus on new competitors entering the market, but what about a major competitor leaving the market? A missed opportunity can be just as damaging as losing market share. How will you deal with possible changes in your top 3 competitors? How will you react to a new competitor in your primary market(s)?
Staffing: Although employee retention and development should be an ongoing focus of every organization, sometimes things don’t work out as planned. Employees will leave for various reasons...health, relocation, different opportunity, etc. Other employees may not be the right fit for the organization and you may decide to terminate their employment FAST. A plan to fill gaps in critical positions will minimize negative impact. Do you have 2-3 resumes on hand for each critical position? Do you have a backfill or cross training plan?
Risk Planning is preparing for an unforeseen business adversity before it becomes a business disaster. Business problems can either (1) happen and be devastating for a business or (2) happen, but with proper forethought and planning, have mitigated negative effects. The choice lies with you.
OnTarget Strategy works with small and medium size business owners in Colorado and across the nation on proactive risk planning. Please contact us to discuss how we can help improve your business health by mitigating your top organizational risks and issues.