Hurrican Shutters

Installing "Peace of Mind"

Make sure your Business is Prepared for the Unexpected

Posted by cat5shuttersllc on October 22, 2012

Make sure your Business is Prepared for the UnexpectedLess than two years after starting a wholesale and retail footwear business, Kyle Berner saw his entrepreneurial dreams come to a screeching halt.

The April 2010 BP oil spill in the Gulf of Mexico resulted in a delayed shipment of about 10,000 pairs of flip-flops he was planning to package and ship to customers ahead of the busy summer season. Though the items had already been paid for by the customers, the hold-up lasted six weeks—and by then his customers weren’t interested in reordering his company’s eco-friendly flip-flops, as they had the previous spring.

“We were in trouble of actually going out of business because we didn’t have any cash reserves,” says Mr. Berner, 32 years old, who juggled odd jobs before founding Feelgoodz in New Orleans in 2008.

To salvage the situation, he quickly signed up with daily-deal website Groupon GRPN -1.28% to run a three-day sale of his flip-flops for 50% off. While the stunt didn’t net him a profit, it did generate enough cash for his business to make a loan payment on time.

If he could do things over again, Mr. Berner says he would account for extra working capital when raising start-up funds.

“We would’ve made sure we had a miscellaneous pad of cash for the unknown,” he says, adding that he now stashes away enough money to cover about three months’ worth of business expenses. “You just never know what life will toss your way.”

Taking “what if” precautions may not seem urgent or even necessary if you’re an entrepreneur just starting out. But it can be wise to set aside some funds and plan ahead in other ways in case a calamity strikes. Just one tragic event could set a new venture back several months or even destroy it for good.

Roughly 25% of small businesses fail to reopen after a major disaster, according to the Institute for Business & Home Safety.

Protecting a new venture from the threat of an unexpected fiasco doesn’t require a lot of money or hard work, says Gail Moraton, business-resiliency manager for the Tampa-based nonprofit.

For starters, she recommends writing up a set of instructions describing exactly how your business functions, including who is responsible for doing each task, security passwords and contact information for key vendors. Then store it in a safe place outside of the office that you and your management team can easily access if necessary.

“It’s about having all this information available because when a disaster hits, you’re not going to remember all of these things,” she says.

Meanwhile, begin building a cash safety net to cover short-term expenses, such as a few months’ worth of payroll and supplier fees, says Dennis Ceru, an adjunct professor of entrepreneurship at Babson College in Wellesley, Mass. This could help you keep your business going while you wait for things to get back to normal following an unforeseen event that temporarily puts your operations on hold.

Taking this step also could help you avoid a disruption should a key vendor or customer suffer from a disaster—preventing you from receiving the inventory or income you rely on. In fact, you might want to ask your prospective business partners if they have a business-continuity plan before agreeing to team up with them on any major projects, adds Ms. Moraton.

As for insurance, your business may be required by law to purchase a certain amount of protection, such as if you’re located in an area prone to flooding or tornados. But don’t assume this will cover you for other potential hazards or that once you’ve taken out a policy, you’re in good hands for the long haul.

“You have to understand what your insurance covers and what it excludes,” says Mr. Ceru. “You always want to have at least an annual review of your coverage, especially if you’re a start-up, because you may quickly exceed the initial coverage as your business grows larger.”

Finally, keep in mind that disaster takes many forms.

Zachary Rose of New York lost tens of thousands of dollars last year when an employee stole critical paperwork from his lead-certification-training business.

He says he wishes he had the $2,000-a-year insurance policy that he’s since taken out to protect his firm from any damages caused by dishonest employee behavior. The business-continuity coverage also includes losses due to other calamities, such as fires, power outages and natural disasters, he says.

Mr. Rose, 31 years old, founded Green Education Services in 2009 after getting laid off from an architecture firm.

In the beginning, “I didn’t really have any money at all, so to look into policies like this wasn’t something that even crossed my mind,” he says, adding that the incident also required him to spend several weeks making sure his students’ certifications weren’t compromised.

Distributed by Viestly


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