How To Write A Business Contingency Plan

How to Create a Contingency Plan for Your Small Business

As a small business owner, you might feel like you’re constantly juggling plates (with peas and gravy on them): managing customers, keeping the accounts straight, and staying on top of inventory. But what happens when something unexpected - like a flood, illness, or supply chain disruption throws a spanner in the works?

A solid contingency plan can save you time, money, and stress when disaster strikes.

Who would have thought that in 2019, someone eating a bat would have resulted in the planet being closed down?? Did anyone have a contingency plan for that?

However, a good contingency plan isn’t just about the “Defcon One” moments, it’s about all the other disruptions and inconveniences that are now REAL in our modern business world.

The less obvious disruptions are broadband interruptions, cyber-attacks, illness and epidemics, and, of course, pandemics.? The trouble is, 95% of business owners get trapped in the “it will never happen to me” – until it does.

What about the tanker drivers strike in 2000?? Supply and logistics were severely impacted very quickly.? This is why a “Contingency Plan” is needed; events that require the need for a contingency plan will almost certainly be out of your control – what you can, indeed MUST control, is how you act and REACT to it.

Here’s a detailed guide to preparing for the worst (while hoping for the best), written with small businesses - and smaller budgets in mind.

?

Step 1: Understand Why You Need a Contingency Plan

A contingency plan isn’t just for major corporations; it’s your safety net when things go pear-shaped. Think of it as your business’s “what if” manual. For small businesses, the stakes are high - unexpected disruptions could mean losing customers, money, or even the business itself.

A well-crafted contingency plan helps you:

• Stay operational during crises.
• Minimise financial losses.
• Protect your reputation.
• Recover more quickly.

?

Step 2: Identify Potential Risks

You can’t plan for every eventuality, but you can prepare for the most likely threats. Sit down with your team (or just a cup of tea if you’re flying solo) and brainstorm possible risks.

Common Risks to Consider:

1. Fire or Flood: A burst pipe, an electrical fault, or severe weather could disrupt your workspace or stock.?
2. Severe Weather: Heavy snow, storms, or heatwaves can prevent customers or employees from reaching your premises, or in outdoor trades, bring your income stream to an abrupt halt.
3. Epidemics and Illness: Think back to COVID-19 - sick staff and customers staying home were major disruptions, then “Lockdown” appeared.? Even the Flu season can impact business.? Who remembers Norovirus?? Yuk, but it spreads through an office in days.
4. Supply Chain Disruptions: Delayed deliveries or supplier issues can throw your operations off track. These can be local issues, or the results of global events.
5. Equipment Failure: Machinery breaking down or IT systems crashing can grind productivity to a halt.? This can vary from a few hours to many weeks, so your plan MUST cover all bases.
6. Financial Challenges: A dip in sales or unexpected expenses can strain cash flow.? Remember the Financial Crisis in 2008, where we saw “runs on the banks” before some failed??
7. Cyber and Communications: That could be a cyber attack on you, a website hack, a social media page hack, or even broadband going down for a lengthy period.? These are the events that can massively impact an e-commerce business.
8. What’s UNIQUE to your business?? Every business operates in a unique manner. What are the specific dangers to your business?

?

Step 3: Assess Your Vulnerabilities

Not every risk will have the same impact on your business. Take some time to prioritise them. A simple way to do this is by asking:

• How likely is it to happen?
• What’s the potential impact?

Example:

• A heatwave in January? Low likelihood.
• Your one supplier running out of stock? High likelihood and a major impact if you have no backup plan.

It’s also worth having FOUR Levels within your Contingency Plan – consider these:-

·?????? Level One – Minor or moderate disruption lasting a few hours, but less than a full day.

·?????? Level Two – Moderate disruption extending beyond one day.

·?????? Level Three – SEVERE disruption expected to last weeks.

·?????? Level FOUR – a TOTAL LOSS scenario – this is your Defcon ONE moment

Each of the levels will require a different action, so be prepared.

??

Step 4: Develop Contingency Strategies

Now that you’ve identified the risks, it’s time to make a plan for each one. Keep these strategies practical and affordable.

Fire or Flood

• Action: Ensure your workplace complies with fire safety regulations and equipment like extinguishers and smoke alarms are in place.
• Backup: Store important documents and data digitally using cloud storage.
• Insurance: Invest in comprehensive business insurance.

Severe Weather

• Action: Keep employees informed via text or WhatsApp.
• Backup: Use flexible working arrangements like remote work or staggered hours.
• Prevention: Invest in a generator or portable heaters if power outages are common.

Epidemics and Illness

• Action: Encourage sick employees to stay home (yes, even that key team member who insists they’re fine!).
• Backup: Cross-train employees so they can cover for each other.
• Prevention: Stock up on hand sanitiser and cleaning supplies.

Supply Chain Disruptions

• Action: Build relationships with multiple suppliers to avoid reliance on just one.
• Backup: Keep a small stockpile of key items.
• Prevention: Monitor industry trends to spot potential disruptions early.? Create a list of possible outsource partners.

Equipment Failure

• Action: Have a list of trusted repair technicians or IT support services.
• Backup: Lease backup equipment where possible, or look into short-term rentals.
• Prevention: Regularly service machinery and backup data weekly. Have a trusted outsource partner network that you can outsource work to.

Financial Challenges

• Action: Review expenses quarterly to identify areas for saving.
• Backup: Build an emergency fund, even if it’s just a small amount each month.
• Prevention: Offer early payment discounts to boost cash flow.? Create a cash flow forecast that predicts potential issues and update this as you see issues developing or progressing – this will highlight the possibility of a financial crisis.

Premises, Communications & Back Ups

·?????? Consider Alternative Premises: Business centres, portable cabin hire.? In the event of a total loss, you want to have options available immediately

·?????? Communications: Mobile broadband and mobile phones make communication easy, but are they enough for volume and capacity?

·?????? Data & Backups: Most businesses back up to the cloud these days, just make sure that it’s done on a regular basis.? What about manuals and documents?? Are customer records done manually or on a CRM system?? It’s not simply about backing up, it’s about being able to access that data too.

?

Step 5: Communicate Your Plan

Even the best contingency plan is useless if no one knows about it. Share it with your employees, contractors, or anyone else who might be affected. Keep it straightforward and ensure everyone understands their role during a crisis.

Also create a list of the people outwith your organisation that you need to contact immediately.? That would include bankers, insurance companies, suppliers, and of course staff.

Key Tips:

• Use flowcharts or checklists for clarity.
• Assign specific responsibilities to team members.
• Hold regular training sessions to keep everyone up to date.

?

Step 6: Test Your Plan

A contingency plan isn’t something you write and forget about. Test it! Conduct a fire drill, simulate a supply chain disruption, or trial remote working to see how your team responds.

Also make sure your team know how to access the plan, the contingency they may have to deal with could be the loss of YOU.

?

Step 7: Budgeting for Contingencies

Small businesses often operate on tight budgets, but there are cost-effective ways to prepare:

• Use free or affordable cloud storage for document backups.
• DIY emergency kits with basic supplies.
• Partner with other small businesses for shared resources, like snow-clearing equipment.
• Take advantage of free online training and guides for risk management.

Remember: prevention is usually cheaper than recovery. Spending a little now could save you thousands in the long run.? It’s also worth checking your insurance policy.? It can sometimes be a requirement that a business does have a “Contingency Plan” in place

?

Final Thoughts

Creating a contingency plan might not sound glamorous, but it’s an investment in your business’s future. Whether it’s a burst pipe, a snowstorm, a supply hiccup, or a GLOBAL shutdown - having a plan in place can help you stay calm, collected, and (most importantly) operational.

So, grab a cuppa, sit down, and start planning. Your future self - and your customers will thank you for it.

TRUE Story:

It was a drizzly, cold night on Sunday 7th December ?2008.? The home phone went just after 10pm, which was unusual in itself.? The alarm company were notifying me of an “activation” at our print factory in Cumbernauld.

There had not been a false alarm since the alarm was installed over three years ago, so immediately, I knew that something was wrong.? I jumped in the car and thanked Landrover for having the foresight to supercharge a Range Rover!!!? Every horsepower was used that night!!

As I neared the building, I could see an Orange Glow – at that point, your heart just sinks, and there’s a combination of not wanting to get there but an even greater urgency to do so.

As I turned the corner the orange streetlights glowed in the winter drizzle, what a fright that gave me.? I was relieved that the glow was indeed the streetlights.

That relief was short-lived; as I turned again to reach my industrial unit, an intense orange glow and an even more intense HEAT were now there to greet me.

The building was engulfed in fire.? Three of the downstairs offices were ablaze, and the fire was spreading FAST to the other downstairs offices, the upstairs studios, and the FACTORY.

The Fire Brigade responded to the 999 call in what seemed like five hours, in reality it was MINUTES.?? Not long after their arrival, the flames were out, and what was visible resembled a WAR SCENE.

The extent of the damage was horrific.?? Offices burned beyond all recognition.? Our beautiful reception was dark, burned and flowing with water.

This was Sunday, around midnight.

By 2am the Contingency Plan was opened and prepared.? We planned on this being a Level THREE event.

By 9am on Monday, the Portacabin was booked, the generator to run the presses in the unaffected factory was in place.?? The team went to the store, got all our exhibition material, and made the Portacabin look like a professional office and shop.?? The insurers were alerted, and the Contingency “Machine” was now moving like a steam train.

We went through the checklist line by line, tick, tick, tick.

Tuesday 10.30am – we were back in FULL production.? The Contingency Plan had WORKED beyond even our most unrealistic expectations.? This was the same Contingency Plan that I RESISTED creating in the first place.

That plan SAVED the business.

You have been warned – the action you take – well, that’s up to you.