4 Critical Factors of Business Continuity Planning that Business Owners Miss

“Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.” 
Morgan Housel, The Psychology of Money

Here’s a true story of a company that had all the right insurance and still couldn’t survive after a major fire (I changed some of the details).

ABC Manufacturing was a rising star in their industry and everything seemed to be going right. When their operating center burned down, it was a major setback – but they were prepared. 

Their insurance policy covered everything: the building, desks, equipment – even the lost revenue while their operations were interrupted. On top of that, they were able to get construction started right away and get everything rebuilt within a year.

When they were faced with a major disaster, everything went as well as it could have – the kind of happy ending you want when it comes to insurance.

Six months later, they were out of business. 

What went wrong? Their continuity plan had a huge hole in it.

Their main client, a Fortune 500 company, accounted for 75% of their revenue. When that client saw their supplier experienced a total loss, they got nervous and found a competing provider while ABC was rebuilding. To make matters worse, the new provider seized the opportunity and poached two of ABC’s key people, making it nearly impossible for the newly rebuilt company to bounce back.

ABC had protected itself financially from the risk of hazards, but they were completely unprepared to lose their biggest client.

I’ve said it before and I’ll say it again: Insurance – while essential to any risk management strategy – is just one way of dealing with risk. To keep your business from ending up like ABC, you need a business continuity plan that can act in parallel with your insurance.

You might be saying, “How could ABC have ever prepared for something like that? There’s no way you can plan for everything!” 

You’re right, you can’t prepare for everything. But clients change suppliers every day, and the businesses that last are the ones that are ready for it to happen to them. For instance, I’ve seen manufacturers contract with competitors in case production is ever interrupted. 

If they had set up a plan like that, ABC would probably still be around today.

Why Does Business Continuity Planning Matter?

In my series of articles the last few months, we’ve talked about several impact areas of risk for small businesses – key personnel, exit planning, employee retention and more. Many of those areas could stand alone as a focus, but not business continuity planning. 

Basically, continuity planning (a.k.a., contingency planning) is what to do if plan A doesn’t work in any of those other areas. It’s about building a plan B, C, D, and so on that supports every other area of business planning.

Despite its importance, business continuity planning is among the most poorly addressed areas of business. 

• We get insurance and think we’re protected from risk. 
• We get a great benefits plan and think retention is solved. 
• We line up someone to buy our business and think our exit plan is done.

But what if your biggest client leaves? What if your indispensable COO moves because her husband got a new job? What if the buyer backs out? What if…? 

I’ll go deeper on the relationship between continuity and other impact areas in my next article. For now, let’s look at four steps of building a continuity plan for your small business:

4 Key Steps of Building a Successful Business Continuity Plan

1. Prioritize Threats to Your Business

Have you thought through the real threats to your business in all 10 impact areas of risk? 

Each and every area of risk has the potential to endanger your company’s future, but which ones are most pressing? For instance, if you’re in your 30s and run a construction company, safety is likely a bigger concern in your day-to-day than perpetuation planning.

Again, you can’t think through every scenario, but you need to identify and prioritize the big threats. 

Ask yourself: 

• What are the real threats to your business? 
• Are the plans you have in place good enough? 
• What have you not thought through? 

2. Get Internal Input

After identifying and prioritizing the threats to your business, the next step is to get input internally from as many people as you can. A lot of business owners skip this step, thinking their view of the company is the most comprehensive, but that’s just not the case. 

When you create a continuity plan, you want to get the perspective of everyone on the team. In the example of ABC Manufacturing from earlier, maybe if the owners had asked people for input, the head salesperson would have said, “If something interrupts our operations, our relationship with our biggest client will be at risk.”

When you look at your company from different people’s perspectives – head of operations, manufacturing supervisor, head of sales, etc. – you can see problems that you otherwise miss from your position at the top.

3. Get the Right External Advisors

Once you have your internal advisory team put together, it’s important to get an external perspective as well from people who understand the risks businesses like yours face. At Ellerbrock-Norris, we help businesses identify, prioritize and address risks like this every day. 

You might hire a leadership coach to work with you and your key leaders to identify potential issues among your team and in your industry. Or you might enlist the help of a financial advisor to teach you and your team how to manage your company’s finances in case of an emergency. 

The right outsider can bring a perspective sharpened by working with other businesses like yours and helping them address situations similar to those you may face. 

4. Join a Peer Group

Last but definitely not least, I cannot overstate the power of joining a peer group. There’s something about being in a room with other people who run similar businesses and face similar challenges that leads to some of the best brainstorming, support and camaraderie I’ve ever seen (shoutout to everyone at Incite Performance Group). 

When you’re talking to people who do the same work as you, you can help each other see and fill gaps and spot trends you might have otherwise missed. We have our ENCORE Safety Network for that very reason – to bring like-minded construction and general industry businesses together.

The thing about peer or advisory groups is that you have people in there who are in every stage of business, a variety of situations, experiencing risk in different ways based on their business, size, market – everything you could ever need advice on exists in such a group!

So there you have it – four steps to building a continuity plan that could dramatically improve the safety of your business and your future. 

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At Ellerbrock-Norris, we’ve been helping keep businesses safe for over 100 years. If you’re looking for an external advisor with experience helping small businesses effectively navigate risk, reach out today.