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When Things Go Wrong: The Importance of a Contingency Plan

Updated on September 26, 2011


Are you prepared for the ceiling to fall on your head? If not, you are setting yourself up for failure. As an entrepreneur, you have to prepare yourself for the worst-case scenario at all times. The best way to do this is to have a contingency plan. What is a contingency plan? It’s simply a backup plan you have in place for foreseen and unforeseen events. There are three main actions that make up a contingency plan:

1. Identifying risks

2. Reducing risks

3. Creating the contingency plan

If you are not prepared for events that could and will wipe out your wealth, then be prepared to lose everything you have worked so hard to get. The process is really simple. The first step is to write down every risk you can imagine that could jeopardize your business. The next step is to prioritize the likelihood and severity of each event. Let’s examine a common event amongst entrepreneurs: The loss of a customer. From this foreseen event, it’s obvious that the loss of a customer is highly likely and could halt your entire organization. To reduce the risk of losing a customer, try your best to meet or exceed the customer’s expectations. This will reduce your chance of losing a good customer to competitors and solidify your place in the target market. Another great way to reduce the loss of a customer is to develop customer intimacy. Have you ever purchased a car and received a thank-you note from your salesperson? This is a form of customer intimacy. You should establish a business relationship with as many of your customers as possible.

Sometimes, you will lose customers regardless of what you do. So what is your contingency plan for this event? You should constantly look for other customers that will buy your products or services. Having a strong marketing plan for your products and services is an excellent way to do this. That is why companies spend thousands of dollars advertising and promoting their products and services. Customers come and go, but your business has to be prepared for this.

Now let’s examine an unforeseen event that an entrepreneur might encounter: Loss of life. Loss of life is the inevitable that everyone chooses to ignore. When you die, someone has to take on the responsibility of handing your personal estate, such as the funeral service, unpaid bills, property, and legal actions. The only way that you can reduce this risk is to live a healthy lifestyle and pray that your time isn’t near, but you still need a contingency plan in place. That is why it is so important to have life insurance. Life insurance is one of the reasons wealthy individuals are able to leave their families in good financial shape when they die. The family isn’t left with an enormous debt, and they are able to carry on the wishes of the deceased. If you are an independent hustler and passed away, then you have an organization that is lost if you haven’t prepared for this unforeseen event. The best thing for you to do is to have life insurance and a will, so your wishes can be carried out when you pass.

Everyone is prepared to reap the rewards when things are going great. What about when things go bad? As an entrepreneur, you have to examine every aspect of your business and make sure there is a contingency plan in place for disaster. Creating a contingency plan is simple, but being reactive instead of proactive is destructive. Protect your business at all times with a contingency plan, and you should be able to survive any crisis that comes your way.

Edgar Alan Cole, M.B.A.


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    • aykianink profile image

      aykianink 

      5 years ago

      Awesome. Let me know when you do one. You will have my support, of course:-)

    • Edgar Alan Cole profile imageAUTHOR

      Edgar Alan Cole 

      5 years ago

      @aykianink A S.W.OT. analysis definitely wouldn't be too much for hubpages. I actually think its a great idea.

    • aykianink profile image

      aykianink 

      5 years ago

      Curious, would a S.W.O.T. analysis be too much for hubpages?

      On another note, can you contact me privately? You have me as someone you're following and I'd like to talk to you. Thank you:-)

    • Edgar Alan Cole profile imageAUTHOR

      Edgar Alan Cole 

      6 years ago

      Frogyfish,

      Thank you for your comment. You are absolutely right. If you look for cracks, you will find them. Thank you for the welcome as well!

    • Edgar Alan Cole profile imageAUTHOR

      Edgar Alan Cole 

      6 years ago

      Adrienne,

      Thank you for your comment. I have had the ceiling cave in on me several times. Now, I'm prepared for the fall and want others to be as well.

    • frogyfish profile image

      frogyfish 

      6 years ago from Central United States of America

      Wise counsel here.

      Yes, if we look hard enough there are probably tiny cracks in the ceiling...

      And...welcome to HubPages!

    • adrienne2 profile image

      Adrienne F Manson 

      6 years ago from Atlanta

      Lord knows the ceiling has fail on my head many times, and I was not prepared. Thanks for sharing.

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