How to Craft a Contingency Plan for Business

LegalLands LLP is a firm dedicated to helping small business owners and entrepreneurs in running better businesses. Mr Rajiv Tuli has been a part of the Legal Fraternity for over 22 years now. His practices cover diverse areas of Cross-Border Transactions, International Taxation, Contract Negotiations, Commercial and Tax Litigation, Banking and Project Finance, Commercial Arbitration, Business Structuring, Government, Regulatory and Secretarial Affairs, Foreign Collaborations and Joint Ventures, Inbound and Outbound Foreign Investment, National / International Not-for-Profit Companies / Trusts / Societies. His clientele includes Multinational Companies, Investment Banks, Family-Owned Businesses, Startups, Not-for-Profit Organizations, Funds and High-net-Worth Individuals.

Understanding that nobody would want to be blindsided by unexpected strikes to the company, Rajiv Tuli emphasises the importance of contingency plans for businesses. He suggests that a good contingency plan stems from the understanding of how various business operation could derail a growing company. To get a sense of this, he suggests that business owners play a game called the “What-If” game, which could pose a series of questions that could help owners identify potential problems before they happen.

The What-If Game

The players must involve key people involved in the business ranging from partners to insurance agents and managers, which would basically be the everyone who would get involved in case of an emergency requiring the aforementioned contingency plan.

Here are some questions that could be posed to kickstart the game, along with why it is important that they are asked.

1. What if we lose our largest customer tomorrow?

This could be one of the most painful experiences, especially if your largest client represents 25% or more of your annual revenue. A big loss that quite a few companies have suffered from. A profitable business could be on the verge of collapse overnight if this were to happen.

2. What if a stalwart salesperson leaves the company?

You don’t know what you’ve got until it’s gone. It can be as simple as that. Unless the salesperson in question were to quit, you may not realise what an asset they had been. Almost equivalent to losing your biggest client, if this salesperson represented more than 25% of your total revenue, it is important to have a Plan B.

3. What if we get hacked?

Every company’s digital platform is a cornucopia of information, that needs to be well-protected. Of course, there is no dearth of ingenious hackers and hostile rivals. So ask yourself, is your company prepared to deal with hackers and such during holidays, for instance? Talk to your IT person and ensure that there are safety measures that could minimise the damage, and if possible avoid a hack altogether.

4. What if a disaster strikes the company?

Make sure your insurance is up to date. If your company is expanding across branches and cities, make sure you talk to your insurance agent about the same, guaranteeing proper coverage. Also, make sure that all your data is backed up on a cloud and not merely stored on premise so that is easily retrievable in case of a calamity like floods or a fire.

5. What if receivables cannot be collected?

Bankruptcy is every businessman’s fear. Ensure that net 30 does not become net 60 or net 90. It customers miss payment due dates, it could be a sign of trouble, so be alert. If your clients largely live in an area prone to natural disasters, make sure you get all your receivables paid before the start of the disaster season. Or else, there could be an increase in debt overnight!

6. What if a new product/service fails?

Failure is as natural to businesses as it is to life itself. Always take into account the level of risk before you finalise on taking one. Try not to let a growth venture or its failure derail your entire company. It is imperative to have a fall back plan in case of a failure.

 

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Writing is not just the profession but it is the passion that keeps me going! This is my way of meditating as I vent out my emotions, thoughts, and knowledge via this amazing medium called – WORDS. With about 9 years of experience in delivering unique and engaging content, I have learnt one thing and that is “There is no end to learning, every new topic is like an encyclopedia” – Happy Writing!