Lesson 9: Crisis Management
What You’ll Learn: A disaster isn’t a matter of if but when, and being prepared for one – from employee theft to “the big one” – will protect your business and livelihood. We’ll take you through the simple steps you can take to ensure that your business will survive just about anything thrown at you.
“A crisis is an opportunity riding in a dangerous wind.”
As you think about starting a business, the last thing that probably comes to mind is planning for a crisis. This is especially true if you’re a one-person operation working out of your spare bedroom. Why on earth would you need to do all this extra work in the unlikely event of a disaster?
The bigger question is, why would you go through all the trouble of starting a business without having a plan to protect it from internal and external threats?
As we’ve learned from the COVID-19 pandemic, an unlikely event can ruin even the best-laid plans of businesses large and small. A crisis isn’t a matter of if, but when. It doesn’t have to be a global pandemic either. It can be a greasy fryer that catches fire or an employee taking a little extra out of the till each day. A slow bleed can be just as dangerous and just as deadly as a mortal wound.
A crisis plan doesn’t have to be a big undertaking either. Think of a crisis plan like you would a fire extinguisher. In the unlikely event of a fire, you want to know only have a fire extinguisher handy, but know how to use it. In a crisis, your plan will tell you where your fire extinguishers are, such as having copies of important documents stored off-site or having access to account numbers for bank accounts and passwords.
There are also steps you can take in your planning to reduce the likelihood of a disaster happening in the first place or if it does happen, reducing its impact. By understanding the process of crisis planning, you can put proven processes in place that will work for nearly any crisis you could possibly experience.
Yes, you can roll the dice and hope that a crisis won’t strike for years or even decades to come. Some small businesses have evaded one for decades. Others have gotten caught in a wildfire that spread so quickly they were barely able to save themselves, let alone their business’ key records.
Kiana Kabanje is the Disaster Preparedness Outreach Program Manager for the Emergency Management Division of the Washington State Military Department. She provides disaster preparedness public education through a variety of programs and publications to encourage and individual and community preparedness.
Digital Print Version
In planning for a crisis, there are two distinct levels of impact. There are the hard dollars, which is property and inventory loss, lost revenue, insurance deductibles, etc. These are fairly easy to calculate. And then there are the soft dollars: increased absenteeism and turnover, decreased productivity, etc. This is the slow bleed of a business that will creep up on you, eating into profits.
The Four Stages of a Crisis
Every crisis has four distinct phases. In each of the first three phases, there are things you can do as a business owner to 1) decrease the chance a crisis will occur in the first place or 2) reduce the impact it will have on your business. We’ll visit these briefly below. You can take a much deeper dive into how to create a disaster plan yourself in our online planning guide – When Trouble Strike: A Small Business Crisis Planner.
Stage 1: Pre-Crisis
This is the warning stage. Nothing has happened yet and you may not have even thought it could happen. This is the time to assess the likelihood and impact of various crises to see how each will affect your company, employees, customers, suppliers, operations and bottom line.
Stage 2: The Crisis
You’re in the middle of it now. There’s no turning back. The crisis will affect your business in one respect or another. Ignoring it is not an option. The only thing you can do is control as much as you can so you can move to the next stage. The acute stage, the actual crisis, is often the shortest of the four phases.
Stage 3: Clean-Up
This is the stage where you finally get to either breathe a sigh of relief if you did some crisis planning in the pre-crisis stage, or sift through the wreckage that follows a crisis – financial stress, loss of customers, loss of revenue or even bankruptcy. This period can last indefinitely if you failed to do proper planning beforehand or failed to respond properly in the midst of the crisis to minimize its impact on the backside.
Stage 4: Post-Crisis
This is where you can turn a challenge into an opportunity. No matter what the crisis is, the goal is to move from Stage 1 to Stage 4 as quickly as you can. If the crisis required something that you could control, you may never have had to go through Stages 2 & 3. If the crisis was completely out of your sphere of influence or control, then how you worked your way through it will determine how quickly you reach Stage 4 and begin to see what opportunities lie before you now that the crisis has passed.