What would you do if your business suffered a ransomware attack tomorrow? Do you have a contingency plan in case of a tornado, hurricane, or earthquake? The unexpected can happen anytime, and small businesses can get hit particularly hard.
Small businesses are the backbone of many economies. They are critical for job creation, innovation, and community development. When we examine the state of Tennessee, we find a significant presence of small businesses. These small enterprises account for 99.5 percent of the total number of companies in the state, amounting to roughly 636,000+ establishments. Remarkably, they employ a substantial portion of the Volunteer State’s workforce, with 1.1 million individuals constituting 42.4 percent of the total employed population. Among these small businesses, approximately 540,000 operate without employees, indicating that they are likely sole proprietorships managing unincorporated businesses. Another category, comprising around 82,500 enterprises, falls within the “1-19 Employees.”
Considering the definition provided by the Small Business Administration (SBA), which classifies a small business as one having fewer than 1,500 employees and average annual receipts below $38.5 million, the significant numbers observed in Tennessee align with these criteria. To exemplify this further, in Knox County alone, there were only 45 businesses with 500 or more employees out of 22,824 establishments in 2020. More than half of these businesses, precisely 12,979, employ just one to four individuals. Based on data compiled by the Knoxville Chamber, the primary sectors represented among small businesses in Knox County are health services and retail trade.
So with small businesses comprising such a crucial amount of our local and global economy, small business owners need to understand the significant risks they face, ranging from financial uncertainty and market volatility to natural disasters.
60% of small businesses fail within six months of falling victim to a cyber-attack.
Thus, small business owners must prepare for the unexpected to ensure longevity and success. In this article, we will discuss some tips to help small businesses get ready for anything.
1. Create a Contingency Plan For Small Businesses
Creating a contingency plan is one of the most critical steps in preparing for the unexpected. A contingency plan is a set of procedures that help a business respond to unforeseen events, such as natural disasters, supply chain disruptions, or unanticipated financial setbacks.
The plan should outline the business’s steps in an emergency, including who will be responsible for what tasks. It is also critical for business owners to know how to properly and effectively communicate with employees, customers, and suppliers.
2. Small Businesses Should Maintain Adequate Insurance Coverage
Small businesses should always maintain adequate insurance coverage to protect them from unexpected events. Insurance policies should include things like:
· Liability coverage
· Property damage coverage
· Business interruption coverage
· Data breach costs
Business interruption coverage is essential. It can help cover lost income and expenses during a disruption such as a natural disaster or supply chain disruption.
One of the newer types of policies is cybersecurity liability insurance. In today’s threat landscape, it has become an important consideration. Cybersecurity insurance covers things like costs to remediate a breach and legal expenses.
3. Diversify Your Revenue Streams
Small businesses that rely on a single product or service are at greater risk. Unexpected events can cause them significant harm. Something like a raw material shortage could hinder an organization without alternatives.
Diversifying your revenue streams can reduce this risk. It ensures that your business has several sources of income. For example, a restaurant can offer catering services. A clothing store can sell merchandise online as well as its physical location.
4. Build Strong Relationships with Suppliers
Small businesses should build strong supplier relationships to ensure a reliable supply chain. A strong relationship with suppliers is significant for companies relying on one supplier for their products.
In the event of a disruption, having solid relationships matters. It mitigates the risk of supplier bankruptcy or supply chain issue. Supplier options and flexibility can reduce the impact on your business.
5. Small Businesses Need to Keep Cash Reserves
Small businesses should keep cash reserves to help them weather unexpected events. Cash reserves can help cover unexpected expenses, such as repairs, legal fees, or loss of income.
Generally, businesses should keep at least six months’ worth of expenses in cash reserves.
6. Build Strong Outsourcing Relationships
Business owners are at higher risk if they try to do everything in-house. For example, if a key IT team member quits. In this case, the company could face significant security issues.
Build strong outsourcing relationships with an IT provider and other critical support services. If something happens to a company’s staff or systems, they have a safety net.
7. Check Your Financials Regularly
Small business owners should check their finances regularly to ensure they are on track to meet their goals and identify any potential issues early on.
This tracking includes:
· Tracking income and expenses.
· Creating and reviewing financial statements.
· Regularly meeting with a financial advisor.
8. Invest in Technology; Small Businesses are never “Too Small”
Investing in technology can help small businesses prepare for unexpected events. For example, cloud-based software can help companies to store their data off-site. This practice ensures that it is safe during a natural disaster or cyber-attack. Technology can also help businesses automate processes. Automation reduces the risk of errors and improves efficiency.
9. Train Employees for Emergencies
Small businesses should train their employees for emergencies to help ensure that everyone knows what to do in the event of an unexpected event. Companies should have a plan to communicate with employees during an emergency and confirm that everyone has access to emergency preparedness programs.
10. Stay Up to Date on Regulatory Requirements
Small businesses should stay current on regulatory requirements and always comply with all laws and regulations. Make sure your organization is knowledgeable and on top of all tax laws, labor laws, and industry-specific regulations. Non-compliance can result in fines, legal fees, and damage your business’s reputation.
Ultimately, small businesses face many risks. But by following these tips, they can prepare themselves for the unexpected!
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The article was used with permission from The Technology Press.