Uncontrollable factors can have a profound effect on business operations. Circumstances can change overnight, directly impacting your employees, your customers and your business decisions. When unforeseeable events occur — COVID-19, anyone? — what can you do to keep your business afloat financially and practically?
Risk or uncertainty: What’s the difference?
Business risk is when the odds of future events can be measured and factored into your plans. When you don’t know the probability that something may happen, you’re dealing with business uncertainty.
Unlike calculated risk, business uncertainly cannot be controlled, making it even harder to prepare for. For example, if a competitor sets up shop a few blocks away, do you have a strategy in place to retain your sales? If there’s another mass shutdown, can your business model adapt and carry on?
An astounding three out of every 10 U.S. small businesses report they likely won’t survive 2021 without additional government assistance — that’s nine million small businesses at risk of closing for good as a result of the pandemic. The past year has demonstrated the need for a flexible business plan that confronts all the what ifs. Forward-thinking businesses have a greater chance of growing and thriving in even the most uncertain environments.
What causes uncertainty — and what can you do about it?
Business disruptions can arise from anywhere, but they’re commonly attributed to the following:
- Whether it’s the stomach bug making its rounds around the office or a global pandemic shutting the entire office down, unexpected illness can shake up your workforce productivity, deadlines, inventory and more.
- Economic conditions. Sudden shifts in economic activity (good or bad) can have a huge effect on your sales, inventory and cash flow.
- Consumer behavior. Anything that changes a customer’s needs or how they go about filling those needs can alter the way you do business.
- From taxes to minimum wage to employee rights, the government can play a key role in who you hire, who you fire and everything in between.
While you can’t plan for everything, you can take steps to safeguard your business:
- Strategize for various possibilities. Acknowledge the unknowns and be flexible. Think about how your business model would adapt if XYZ were to happen.
- Develop worst-case scenarios. Face your biggest fears. How would your business work through them to come out on the other side?
- Educate yourself on the state of the economy. The more you know about how your business can be adversely affected, the better you can brainstorm the potential risks and solutions.
- Reevaluate your resources. Are you confident in your team, vendors and suppliers? Can your cash reserves carry you through an emergency? Build a strong defense before you actually need one.
- Remain guided by your vision. Remember why you went into business in the first place. Ensure that your whole team’s goals and efforts are aligned to bring your organization success.
Start planning for tomorrow, today
Uncertainty affects businesses of all types and sizes. That’s why you need solid contingency plans to adapt to the changing variables. NJ CPA firm Magone & Company’s advisory services can help position your business ahead of the challenges to come. Contact us today at (973) 301-2300 to learn more.