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When Things Go Wrong: The Importance of a Contingency Plan
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.