When running a business, problems are virtually unavoidable. It is how you deal with these problems that can be the difference between failure and success. You must have contingency plans in place so you are prepared when problems arise. You must also be able to manage a crisis once it occurs.
Purpose: Contingency Planning
A contingency plan is also known as a backup plan. It is a ready-made strategy you can implement immediately upon a change in your business's condition. The plan is designed to enable your company to weather unfavorable circumstances. Contingency plans should exist for everything from financial downturns to natural disasters. Having this plan in place will keep your business operational, if not profitable, during circumstances that could adversely affect it.
Purpose: Crisis Management
Ideally, your crisis management strategy should be implementation of your contingency plan. This is not always the case. You simply cannot anticipate every disaster that can befall your company. When an unforeseen circumstance occurs that can put your business in a bad position, you must analyze and react to the situation. Your action must be swift and decisive to avoid making a bad situation worse.
How to Implement: Contingency Plans
The best contingency plans are the ones you never have to use. Management should meet and discuss both the goals and the strategies to attain them. Once management designates a primary strategy, it should create two or three alternate routes in the event the primary does not work. For example, say a commercial bank wants to expand its business by targeting out-of-state businesses. The strategy ends up costing more than it is bringing in. A contingency plan is to concentrate on local businesses and expanding outward through word-of-mouth.
How to Implement: Crisis Management
A contingency plan is not always suited to a crisis. Not meeting sales goals is a problem. The building of your roof collapsing is a crisis. Losing half your business to a competitor is a crisis. The key to crisis management is keeping a level head. You must analyze the situation quickly, but thoroughly. You must act in a timely fashion, but not without thinking. A crisis may ultimately be too big to manage, but if you stay calm and act appropriately, your business may survive.