If you’ve been in business for any length of time, you know there are a lot of variables. Some are in your control, like operations and marketing; some are not, like the economy or global events. As a business owner, it is your responsibility to anticipate what may happen and to respond appropriately. And when uncertainty strikes, these seven strategies can help secure your company’s future:
1. Understand the risks and build a risk management plan
Before you can build a risk management plan, it’s necessary to understand the risks your business faces. You should identify all the risks that are most likely to affect your business and then prioritize them based on their likelihood of occurrence and impact on your company’s bottom line.
Once you have identified the risks facing your company, build a risk management plan that includes steps for mitigating each one. It can be as simple as identifying which employees will handle any given task in case of emergency or more complex (but still simple) like filing for bankruptcy protection before things get out of hand.
Another thing to remember as you establish your risk management plan is to get commercial property insurance. It’s a type of coverage that protects commercial properties. Thus, coverage can be purchased on a building, business contents, and/or stock, which are the items inside the building. It’s important to note that commercial property insurance is generally not intended to cover the cost of rebuilding the structure itself, but rather only the cost of repairing or replacing damaged or destroyed contents within it.
If you’re looking to get yourself a commercial property insurance in Stratford, it’s important to know that even here, their policies can be written on an actual cash value (ACV) or replacement cost value (RCV) basis. ACV policies pay out for what your property was worth at the time you bought it, while RCVs pay out for what it would cost to replace your items today. If you have an ACV policy and your business suffers a loss, you may find that you’re only eligible for partial compensation because your policy doesn’t cover inflation or depreciation in value over time. On the other hand, if you have RCV policy and experience a loss, you’ll get full replacement cost coverage regardless of how much time has passed since you bought certain items.
The type of coverage will depend on whether you’re insuring a business building or contents within it.
Besides commercial property insurance, businesses should obtain other insurance coverage to ensure financial protection. However, choosing the right insurance may vary depending on the company’s needs. For example, if you’re running a nonprofit organization, ask this question: ‘What type of insurance does a nonprofit organization need?’
In that case, it’s best to check reliable websites and other online resources to get more information. You can also work with an insurance agent to help you find the right insurance coverage for your organization.
2. Establish a line of credit
A line of credit is a loan that allows you to borrow money when the need arises. You determine how much money you want to borrow and when you need it, then repay it over time. If your business needs funds quickly, for example, this could be an effective way to get them without having to go through the lengthy application process of applying for a new loan.
A credit line is essentially a pre-approved line of credit that allows you to borrow as much money as possible up to the limit set by your lender. Credit lines are designed for ongoing use; they don’t have an actual cutoff date like traditional loans do; instead, they typically last indefinitely until all funds are used up or canceled by either party involved in this financial arrangement.
3. Manage cash flow
Cash flow is a measure of how much cash is coming in and going out of your business. It is the difference between the inflow and outflow of cash, which means that every time you receive money from customers or vendors, it’s considered an inflow. The opposite applies if you make a payment to a creditor or employee—it’s considered an outflow.
Cash flow isn’t just important for deciding whether you have enough money to pay your bills on time, but also helps together with a vulnerability assessment to determine the health of your business by revealing any problems with liquidity (the ability to meet short-term obligations). If there are too many cash drains on an ongoing basis—like paying for inventory before selling it or needing more capital than profits can provide—your company may struggle to stay afloat during tough times.
4. Have a business continuity plan
Many businesses don’t have a business continuity plan in place, which might put them at risk of losing revenue and clients. A business continuity plan is a blueprint for what you will do to protect your business during an emergency or disaster. With that, you need to consider the following:
- What steps are involved in getting back up and running?
- Who will be responsible for each step?
- How long would it take for you to get back up and running if something happened (i.e., if a fire destroyed your office)? ( having commercial insurance will give your business an inbuilt ability to recover from most catastrophes).
5. Manage and reduce debt
The first step to managing your debt is to understand the type of debt you have. The two primary types of debt are revolving and non-revolving. Revolving credit includes credit cards, lines of credit, and overdraft protection. Non-revolving debt includes mortgage and student loans.
Also, understanding interest rates and how to lower them can help you make informed decisions about your repayment options. For example, you can refinance your education loans to lower monthly payments and interest rates to pay off the debt faster.
Conclusion
During economic uncertainty, a crisis like the COVID-19 pandemic can add even more pressure to your plate. In short, you must protect your business during uncertain times because when the economy is bad, or there’s been an emergency event such as the COVID-19 pandemic, businesses can negatively impact different sectors.
