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Creating a Plan for Unexpected Business Situations

There will be a moment in running your creative business that you’ll have to make a tough decision - and possibly with short notice.

Although no perfect plan can be put into place for unexpected situations - individual circumstances will need to be addressed in the moment - you can create an overall plan ahead of time for some of the most common situations businesses face as they grow. This plan will be useful in helping you gather resources, support, and information during a time when it may be tough to think clearly.

The word proactive is an important one in the business world, yet it’s rarely confronted. It means more than taking action - it means accepting responsibility and using that ownership of our lives and work to take initiative.

“Look at the word responsibility — ‘response-ability’ — the ability to choose your response. Highly proactive people recognize that responsibility,” productivity expert Matt Perman says. “They do not blame circumstances, conditions, or conditioning for their behavior. Their behavior is a product of their own conscious choice, based on values, rather than a product of their conditions, based on feeling.”

As a business owner, you have the ability to choose your response. And the more proactive you are about big issues that you could be presented with, the more likely it is that you’ll make the right choices. While you can’t prepare for everything that comes your way, you can do your best to formulate a response for certain unexpected (yet realistic) scenarios.

What would you do if one of your suppliers or business partners suddenly went out of business or ended their connection with you?

Very few businesses - if any - operate totally independent of outside partners. Even if you’re running a small art studio, there are at least one or two outside companies, vendors, suppliers, or individuals that you rely on to a certain degree.

If you don’t plan ahead and formulate a plan for how you’ll continue your business without a key supplier or partner, you risk crashing and falling when the rug is pulled out from beneath you. As a rule of thumb, it’s always a good idea to have a list of some backup options. You should know that if a partner quits on you, then you’ll contact the next person or company in your contact list. These might not be the partners you end up going with, but at least you have a plan to get the ball rolling.

Another piece of advice is to always retain control over items that have the most significant impact on your products’ total cost of goods sold. This minimizes the impact other partners can have on your business operations.

For example, let’s say you make enamel pins as part of your product line. By copyrighting your designs, you can ensure that the stores you sell inventory to don’t just decide to cut you out of the picture and buy pins that rip off your designs from overseas. This gives you an added layer of control and protection.

How would you handle irreconcilable differences with a key business partner?

You also need to be prepared for what you would do if someone inside your business suddenly left. Having a continuity plan in place for dealing with the loss of a key partner or employee will help you survive what can be a very rough period of time for your business.

As in the case of losing a supplier or outside partner, one of the proactive steps you can take to avoid a collapse in the wake of losing a key internal partner is to make it so that there are no irreplaceable figures in your company. Everyone should be cross-trained, informed, and prepared to step in to other capacities when need be. They may not be as skilled or experienced in that capacity, but there should always be people who can step in and ride out the storm.

What would you do if you found your business staring down the barrel of bankruptcy?

Whether you want to acknowledge it or not, bankruptcy is always a threat when you run a business that relies on credit, loans, and other financing instruments. It’s comforting to think your business will never go bankrupt, but developing a proactive plan that keeps you far away from bankruptcy will be even better.

There are three major causes of bankruptcy: poor market conditions, financing mistakes, and poor decision making. There are obviously dozens of other issues, but the majority can be filed away under one of these three headings.

Poor market conditions aren’t something you can control, but you can safeguard yourself against downturns by always keeping between three and five months of expenses on hand (in cash). When it comes to financing, make sure you keep your debt-to-equity ratio low. And avoid borrowing money unless it’s something that will directly contribute to growth and revenue.

As for poor decision-making, there are lots of mistakes to avoid. One thing you certainly want to avoid doing is “robbing Peter to pay Paul.” In this scenario you take out additional credit with one lender in order to pay off your debt with another lender. This can lead to unethical behavior to keep the lights on, plus it can be illegal under certain circumstances - and it will create a house of cards that could come tumbling down at any moment.

How would you carry on if you suffer a serious injury or illness?

While nobody wants to think about getting sick or hurt and being unable to work, the fact is that thousands of people miss extended periods of work each year as the result of chronic health issues, acute injuries, or debilitating mental health issues that may be unexpected. As a business owner, it would be wise to think ahead and develop a plan for how you would respond.

For starters, your business should always be organized in such a manner that someone else could come in and pick up where you left off if the situation calls for it. This doesn’t mean you always have every file in the right folder, but it does mean you’re systematic in your approach to work and how you manage your business.

Secondly, you need to be sure you have someone who is capable of taking the baton from you if an injury or illness incapacitates you for a period of time. Even if that’s simply a person who will put your online shop in maintenance mode while you’re unavailable, it needs to be someone you can trust.

And finally, if you have employees, put a plan in place for them, too. If they have an unexpected illness or family issue to handle, it’s important for them to know they’ll be taken care of and will have a job when they come back. The last thing you should want to do during this time is add to their stress.

Expect the Unexpected

It’s a cliché term for a reason: You need to expect the unexpected. Having said that, it’s easy to be frozen in fear by planning for the unexpected. The more you shift your attention to far off things, the less time and energy you’re able to devote to what’s in front of you.

Learning how to strike a healthy balance between being proactive and not worrying about things is challenging, yet necessary. By setting aside this time to focus on contingency planning now, you can proactively address issues without constantly worrying about them around the clock.

Anna Johansson is a freelance writer, researcher, and business consultant. A columnist for Entrepreneur.com, HuffPost.com, and more, Anna specializes in entrepreneurship, technology, and social media trends. You can follow her on Twitter and LinkedIn.