If there's one thing the past two years have taught us, it's that anything can happen, and if business owners and executives are not prepared, the consequences can be devastating. Luckily, we can learn from the past and better prepare for the future. Here are five tips to keep in mind.

1. Build Up a Cash Reserve

Perhaps the most important thing you can do to be prepared for unexpected challenges is to have a sizable cash reserve. The more money you have, the better you'll be able to make up for lost operational time, unexpected expenses, and disruptions to cash flow. Set up a business savings account for this purpose if you haven't already, and add to it regularly. Have a monthly or weekly savings goal and stick to it. Treat it like an expense that you must pay so you're not tempted to skip a "payment." This will help you better prepare for unforeseen circumstances.

2. Set Up Realistic Worst-Case Scenario Planning

You will be better equipped to survive challenging times if you plan for the worst. Brainstorm worst-case scenarios that could conceivably happen and have a plan for what you would do.

According to Debra Brennan Tagg at Entrepreneur, "Humans tend to misestimate the risk of the unknown. Some turn a blind eye. Others can only imagine the worst. But 2020 taught us that the best plan lies in the middle. (Because do you really need a garage full of toilet paper?) If you steel yourself for the worst in normal times, you can avoid unrealistic worst-case scenario planning. Look to the experts for data that can help you more effectively identify the risks and opportunities facing your business and how you can best plan for them."1

3. Be Prepared for Remote Work

In 2020, many people were forced to quickly figure out remote work strategies as the pandemic forced shutdowns and related challenges. As 2021 came and went, businesses got better at this and are much better prepared for similar situations in the future. Even if you aren’t convinced that regular remote work or even hybrid is right for your business, the key is being ready to make the adjustment quickly and efficiently. This won't work for all businesses, but the more you can be prepared to continue operations without employees or even customers being required to come to your place of business, the better you'll be able to handle future shutdowns or other unexpected situations.

4. Make Sure Documents Are Backed Up

Make sure you are backing up all important documents. Unexpected circumstances may include natural disasters, fires, theft, or other situations where important information is lost. Everything needs to be accessible, whether you have a hard copy on hand or not. Use cloud services and backup servers, which will not only enable you to access documents if paper copies are lost, but will make retrieving and sharing easier and make you better equipped for remote work.

5. Protect Your Personal Assets

It's a good idea to keep your business and personal finances separate, and nothing better illustrates this than when unexpected challenges arise. If your business finances are directly tied to your personal finances, trouble for your business also translates to trouble for your own personal bank account.

Debra Brennan Tagg puts this into perspective: "Consider a gym owner who had to close down for months. Without a veil between assets, she might have chosen to use personal assets to float her gym during the closure. The move may have bought her time, but the pandemic didn’t arrive with an end date, so all the while she was putting all her assets in jeopardy. Having both a personal and business plan could have protected her individual investments even though she ultimately may have run out of cash and been forced to let her company fail."

In such a scenario, protecting your personal finances will put you in a better position to re-open a business or start a new company.

Businesses all over the world have learned a lot about what it takes to survive as the pandemic has hurled challenge after challenge at them. Who knows what new challenges await? Make all the preparations you can so you are better equipped to meet them head on when the time comes.

1. https://www.entrepreneur.com/article/375131


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank. Nevada State Bank is a division of Zions Bancorporation, N.A. Member FDIC