Updated: May 29, 2020
Too often, I see clients running their businesses as if there is nothing but calm waters on the horizon (obviously, pre-COVID!). Small businesses, and even moreso, sole traders, are particularly vulnerable.
Think back to your pre-COVID business days. What if you had a family emergency and had to go AWOL for a month or two. Would your business survive? How about a new competitor that steals half your clientele? Or your business vehicle or equipment dies unexpectedly and needs replacing?
Sorry to be all doom and gloom. But we know even in our personal life, you get that promotion or the house of your dreams, and you're on top of the world. Only to come home and find that your kitchen has flooded and your dog needs emergency surgency. We're always going to have a natural ebb and flow, and that's in our businesses too.
We can't stop things going to crap from time to time, so why not at least prepare ourselves as much as we can? Almost all of my clients have not had an emergency buffer, and had plenty of reasons why. Not enough cash. That's what credit cards are for! But it's not until you start building one, that you realise how much unconscious (or perhaps very conscious!) stress you are carrying around about money. Here's some words about this very topic a lovely client sent me : )
"Christine took our organisation, which was surviving financially week to week, and through structure and planning provided us with a solid platform from which to grow and develop. Christine finds a way for your funds to work for you and painlessly helps you to build up contingency funds and set aside money for projects."
Apologies for the shameless plug, but I'm pretty chuffed. This client was a farm animal sanctuary, and the simple act of having a contingency budget allowed them to survive the challenging floods and droughts of the last couple of years without the stress of worrying about how to afford buying in all the supplementary feed needed for the animals. Anyway, I digress...so where was I? Ah yes, the 3 steps...
1. Put a little away often
Pretty simple right, put some money away each month into a "rainy day" account. Obviously a lot of us are doing it pretty tough at the moment financially, I appreciate that. But at the end of each month when you are reviewing your financial performance (I'm going to pretend that you definitely are taking time each month to reflect), just put aside a little into a separate bank account.
The amount isn't the critical part right now, it's just starting the practice. I think a percentage works nicely, as it adjusts to how well you are doing (or not doing). So things are tough right now? Just start with 1% of your profits or sales. Then as the clouds begin to lift, increase it a little when you start to have some spare coin. The critical thing is to only dip into it for true "haven't got a dollar to my name" emergencies. Otherwise it will never get a chance to accumulate.
How much is enough? That's a personal call, but in theory you want enough put aside so that you can stay afloat through all the what-if scenarios you can think of. Three months of income or sales is a popular metric, and one I use myself. I don't want to rattle on too much about this point, so if it's of particular interest, I'd recommend listening to Dave Ramsey's podcast, as he answers a lot of questions about this. Last point being, if you are in debt, I would put aside 1k for emergencies, then put anything extra against your loans - nothing feels more secure financially that being "in the black".
2. Have a doomsday afternoon
Now it's not as depressing or morbid as it sounds. If you had the superhero power of hindsight, I'm sure you could prevent or at least reduce the impact of most things that happen to you financially. Problem is we get so busy running the day to day stuff, we don't set aside time often enough to look at the big picture stuff.
Pick a day when you're in a good head space and not feeling stressed or overwhelmed. Then pour yourself a glass of red or perhaps a nice organic chai, and let your imagination go for an hour.
Think about the different aspects of your business that are critical.
What could happen that might trip you up?
What could you do about it if you knew in advance?
Here's some examples:
RISK 1: Susie is my rock star employee
PROBLEM: if she left or had to take leave on short notice, I would have to cover for her, which would stress me out.
SOLUTIONS: Shout Susie a (virtual) coffee and see if she is happy. Is there any free/cheap professional development or flexible arrangements I can offer as a way of thanking her? Chat to Susie about wanting to start training another colleague in her role for leave cover etc. Reassure Susie she is not being replaced! Ask her feedback re who she would recommend, create a training schedule, and let Susie manage the process.
RISK 2: I'm in a bit of denial about that new cafe opening up around the corner. Their menu and shop fitout look really swish, looks like they have a bigger budget to play with than me.
PROBLEM: Potential incoming competitor just around the corner (and let's face it, with the online world these days, this is happening to all of us most weeks, so we can't get complacent or a big bully may just come and steal your lunch). May lose some clients but haven't got a plan on what to do about it yet. Just thinking about it causes stress.
SOLUTIONS: Block out a day to revisit business plan and marketing strategy (please tell me you have one!). It doesn't have to be swanky, just revisit what makes you "you", how you convey that to customers and how you add value in your own unique way. Create a plan of attack - marketing calendar for the next month (could be social media, advertising or old school meet & greets), and revisit monthly. If overwhelmed or confused, ask for some help from fellow entrepreneur friends or a consultant.
3. Put it in writing
It's the people that put the spark into your business. We all get that. What plans do you have should your only and or critical *spark* go out for a bit? Let's start with you, but I recommend doing this process for all key roles or staff. If you have other staff, ideally you would train one or more of them to back fill for you as needed. Longer term, this means you may be able to step back from the day to day operations, and focus on the "big picture" stuff.
Write a list of all the things you do for your business.
Reorder the list from most important to least important.
Put an asterisk against items that only you know how to do.
Now look at that list and get creative - say you had some personal stuff going on and needed to find some extra time in the week to attend to it. Or wanted a work free holiday, heaven forbid!
Depending on the size of your busines, you may not be able to completely delegate to key staff. But are there some tasks you could delegate to another person for a few days/weeks if need be? Could your hubby pay the bills? Your bestie organise deliveries? A virtual assistant to man your inbox queries?
If just the thought of delegation makes your chest tighten, I hear ya, sister! But how much better would you feel knowing that you had a go-to plan if something did go awry. Those of us more on the, shall we say, controlling end of the spectrum, are always thinking about the what ifs "what if's".
An example list:
1. Look after current clients*
- taking orders
- arranging deliveries
- responding to queries
Possible solutions: Ask x (sister-in-law, friend) if they would be willing to be my back up if I needed time off work at short notice. Offer to compensate them for their time. If they say yes, do up process notes and keep them up to date. If unwilling or unavailable, research a good virtual assistant who is willing to do same and do a test run when things are quiet.
I would suggest not delegating communications to anyone else unless absolutely necessary. Either way, I would suggest sending communications to clients letting them know you're away for X weeks but person Y will take good care of them, and you are still contactable via mobile and email. If the number of queries you get are high volume and predictable, this could be outsourced through documenting some automated responses, it really just depends on your business.
2. Onboard new clients*
Possible solutions: Try and automate this as much as possible with email sequences, online forms and templates.
3. Answer prospective client queries*
Possible solutions: If you've got a lot going on at the moment, stability is your priority, not growth. Have an automated message explaining that there is currently a delay in response time due to circumstances out of your control, but you will be able to reply to them in X weeks. Alternatively, build scripts or templates and hire a virtual assistant to look after it in your absence.
4. Pay bills & do invoicing*
Possible solutions: Because you've got a savings buffer, thanks to Step 1, making sure invoices go out each week for cash flow is no longer critical. Delegating bill payments is tricky at short notice due to account access, so this is something best to be looked after by yourself or your partner if you share an account. Alternatively, you could pre-pay by depositing an amount to cover the bills (if predictable), or ring your suppliers to explain the short term delay.
You will be amazed at how awesome you will feel when you realise you have all the 'what-if' scenarios covered. Enjoy the process!
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