Planning For The Unknown

Planning For the Unknown

First and foremost, the most important thing you can do when planning for the unknown is to be prepared. The following are some tips from the Small Business Association:

Step 1: Assess Your Risk

Which natural disasters are most likely to affect your business? Some common hazards include: power outages, hail, fires, hurricanes, tornadoes, earthquakes, wildfires, flooding, etc.  If you’re not sure which kind of disaster is likely to happen in your area, ask those who have lived in the community for the past 10, 20, 30 or 40 years +.  They will have amazing stories of ‘when they were kids’.  In my area, everyone talks about the blizzard of ‘78 where kids were stuck at school for weeks on end, people abandoned cars on the highway and many people had to get out of their house from the second floor because the snow completely blocked their front door.  In my area they’ll also tell you of a massive hurricane almost 100 years ago that wiped an entire theme park off the boardwalk.  It can be a fun trip down memory lane and I find that more interesting / fun than just looking up old records or statistics, which are also valid ways to do your research.

Speaking of statistics, they say that 25% of businesses won’t open again after a disaster.

Step 2: Create A Plan

The SBA has many checklists and safety tips on their website. You can also check out the IRS guide on preparing your business for a disaster as well as The Federal Emergency Management Agency (FEMA) emergency preparedness checklist and toolkit.

Some common themes of disaster planning include preparation before, during, and after the disaster. I highly suggest you check out these lists now.

Step 3: Execute Your Plan

This is the last part of planning for the unknown, but certainly not the least important. You’ll want to be sure to practice your plan with your staff so that everyone is prepared should a disaster happen.

Okay, now that I know how to prepare for the natural disaster on the physical side of my business, how does my business prepare for the financial side?

Let’s do this in 6 steps.

#1 Calculate: What would your revenue loss be?

How much money per day I’m closed will I lose?  Per week? Per month?

#2 Calculate: How much would I need if I had to rebuild / repurchase?
If your van becomes flooded in a storm you will be out of work longer than you expect.  The insurance company will first want to know if your van is fixable, since it’s during a time where the professionals are also fixing their own places of business. You might have to wait 1-2 weeks just for them to become operational. Then you have to wait your turn, because everyone else’s vehicles may or may not have been flooded, so you may have to wait another 1-4 weeks for them to say whether your van is totaled or fixable. After that, you’ve got to order your grooming van. Currently, new van turnaround time is over 12 weeks. The insurance company may also not pay you out right away for your van. You may need to come up with a new down payment or you’ll have to wait.

#3 Calculate: What won’t my insurance cover?

It could be very devastating depending upon what your insurance will and will not cover. Let’s still use the example of a flooded van. Imagine you don’t have flood insurance and your van insurance company says they will not cover your vehicle. You’re going to have to figure out how to pay off that van and get a new loan for a new van. Plus, it can be a tricky spot where the insurance company may or may not pay out for lost wages. It all depends on your insurance company and the way your policy is written. It’s better to find this out before a disaster happens. I want you to find out if the insurance company will cover those lost wages, and whether or not they will cover this unfixable van. Will they cover the time from when they say that they will cover the van until the time the new van comes in?

With the lost wages, what percentage of your wages is the insurance company going to cover? Do they just cover x amount, x amount for a certain amount of time, etc.? Is it based on how much you bring in or the business’s gross revenue? Different insurance companies do it in different ways. 

#4 Calculate: How much overhead will you need to pay during this period?

Per day? Per week? Per month?

Remember that you will need to pay these bills even if the insurance company has not paid out.  Your landlord or lien holder expects to be paid.  If your business is non operational for the next 3-6 months, what does that look like?

#5 Calculate: How much will it cost to train or hire new employees?

This may not be easy to figure out how much it will cost but it’s a reality that many people move out of an area after a disaster has created devastation.  If your business is closed for 3-6 months, they may need to find new jobs or move in order to survive, depending on a lot of factors.  Consider how you’ll attract new employees or simplify your business to run profitably as a solopreneur.

#6 Calculate: How much will it cost to market to new clients?
Just like your employees may choose to relocate to a new area after a natural disaster, the same goes for your clients. Even if your clients don’t choose to relocate, if your business is closed for 3-6 months it's likely that your clients will go somewhere else to get their pet groomed. You’ll need to account for how you will attract new clients when your business is back up and running.

This is a lot of “what ifs” but the point of these exercises is to have the answers now when it’s ‘not going to happen to me’.  It’s so much easier to make these decisions when you’re not in the middle of devastation. 

The Savvy Groomer suggests you have a minimum of 3-6 months and ideally 6 months - 1 year of an emergency fund, one for your personal life and one for your business.  Students of our Personal Finance on a Leash Masterclass that went into covid were not stressed out because they had plenty of money in their accounts to ride out that pandemic.  These students also had sinking funds to help buy things that ended up being good deals.  If you’re interested in learning more about Personal Finance on a Leash, check out www.savvygroomer.com/enroll