Contingency planning. It’s something that many entrepreneurs find boring to think about, but it’s an essential element of business planning. Having a contingency plan in place helps you alleviate any fears and worries you may have around keeping your business running smoothly and keeping that income coming in should the unexpected happen.
Because we don’t expect anything to go wrong or happen to us, but we need to be prepared if it does.
For those who know me, you will be aware that I’ve been going through treatment for breast cancer recently. When faced with my diagnosis, I was also faced with a decision about what to do with my business. When you're diagnosed with something like cancer, the last thing you want to think about is your business, but it was vital for me to try and keep working. I was able to do so, as I'm at home all the time. Unlike someone who works in an office, there's no risk involved in carrying on with my work.
But when faced with the initial decision, I had to address the different options. Do I close my business? Can I just take a step back? What do I need to do, to still have a business when I'm in a position to return to it? The process of managing breast cancer is around 9-12 months, at the very least. I’ve also undergone several rounds of chemotherapy over about five months. I've been able to work for probably two out of three weeks during each cycle of chemotherapy.
You may not have faced a diagnosis such as I have, but you might have to face something unexpected. Because there's a lot of unknown things that can impact your business or happen in life. The bereavement of a family member who suddenly needs looking after. Something could happen to you or a family member, which means you need to change how or when you work.
Think about what would happen if something like that happened. Take the COVID lockdown and the sudden need to start homeschooling. How do you manage your business in any form of crisis? Do you have a plan for what you might do?
I'll be honest - I didn't have a plan. I never really thought about what would happen if I wasn't available. We don't like to think about these things, especially at the beginning, when we’re just starting in business and don't really know what things look like.
If you got run over by a bus tomorrow, what would happen to your business? How would you manage that? If you’re a Limited Company, are you the only Director? Is that a practical plan for your business? Could you have a partner who is also a Director? Now you have to think about paying dividends and things like that.
Now you need to think about your business model as a whole. Is your business set up in a way that would support someone taking over the business if something happened to you? Could somebody take over your clients quite quickly if you needed them to? Do you have a Virtual Assistant or someone you work closely with who could keep things ticking over - or even just reply to your emails? Who would just take over for you?
I think it's quite a good idea to have somebody who could cover for you, no matter the circumstance. Take holidays, for example. So many entrepreneurs struggle even to take a break away, as the business simply isn’t set up to work without them in it. If you’re looking to take school holidays off, do you know someone who doesn’t have children that would be happy to take over some of your work in the holidays or at least be available if you needed them to?
It’s not always about contingency planning for emergencies. It’s about thinking about how you take yourself out of the equation and still maintain your business. So for me, that has meant not taking on new clients and being very, very careful about what I say yes to. I have to say it's been very frustrating not being able to take on new clients, but I have managed to keep my business going. And through my surgery and having four to six weeks off, I’ve decided it’s not too problematic for my business in the long term. Most of my clients have also been very understanding about that. And you learn something about your clients if they do not understand about these things.
You might be having a baby, for example. Hopefully, this is the kind of situation you can plan a bit better for - but you may also want to take a bit of a sabbatical and do some travelling. How would you manage those sorts of things, and how do you keep up with your work and keep it ticking over?
So take the time out to make a contingency plan for your business. Think very carefully about how you might manage if something happened or if your income dried up - because things happen all the time.
This is why it’s so important that you try to have three months worth of your business costs put aside as a safety net. If you didn't work for three months, your business could then survive, and there would be money in it.
Sometimes it's difficult because we often find ourselves working hand to mouth, especially as a sole trader. But if you're a sole trader, have a separate bank account for your personal money. Try and keep enough money in your business, so if you’re not able to work for three months, your business will be able to survive. Because living very hand to mouth is tough. If you don't have the means to do that right now, start building it gradually. Start putting a little bit more aside, month by month, to help get this safety net in place.
Think about what would happen if you couldn't work at all? What if you could work less? None of us want to think about these things, but we need to if we’re going to protect ourselves and our businesses.
But I think it's also looking at your systems and processes and asking, if I wasn't here, how much of this would be able to run without me? So for me, my Virtual Assistant will manage my courses and the back office things for me. Obviously, the client work is difficult to deliver, but I have a contract with somebody and an agreement that they would take over my clients for me if I were incapacitated longer term.
So take time to think about these things in advance and ask yourself what would you do? Would you pause your business? Would you ask somebody to take it over? Build a network of people that might be able to do that for you. You could do that as a reciprocal arrangement - you help them, and they help you, should the circumstances arise. Or, at the very least, they’d be able to take it on and pass out the work to others if that was needed.
Often, it’s those unexpected things that can impact us and our businesses the most. Contingency planning is simply a way of trying to plan for those unexpected things. Because we all hope they never do, but we need to plan how we might act and what we would do if they did.