Business Basics: Do you have a contingency plan for emergencies?

If you have a fairly large company, you have management, route, service, and warehouse and office personnel to help you with the day-to-day activities such as ordering product, counting and depositing the money and the filling and repairing of your equipment. This is not the case if your company is at a size where you have not yet hired your first employee.

In the meantime, it is up to you to take care of the everyday tasks to run your company. What happens if tomorrow, you become ill or suffer an injury, or maybe once every five years you want to take some time off?

Would you be able to recover from a major disaster such as a fire or tornado or hurricane?

Have you thought of all the potential negative events that could affect your company? Like updating your insurance policies, it is always better to have a plan before an unexpected event occurs rather than waiting until after the event. My personal preparation motto is, "If it can go wrong, it will."

Whether I am planning for a sales presentation or my family's financial well being, I always think of what could happen and determine my back up plan.

List all potential scenarios
A start is to create a detailed list of all potential scenarios you can think of which would be detrimental to your business and the possibility of their occurrence. This will allow you to create a plan to determine and minimize the potential impact to your company and to attempt to prevent it from occurring in the first place.

You may want to consider categorizing the events into three or more categories. For example, personal, environmental and outside factors. A personal event such as illness or injury, would prevent you from completing the day-to-day activities of your business. The catastrophic event would destroy the physical components of your company. Examples include fire or weather events such as a tornado, hurricane or flood.

The "outside factor event" would cause a need for a quick, emergency response. An example may be a food contamination event causing several hundred of your customers to become sick. The spinach industry comes to mind as an example.

Let's take a look at the first scenario. This situation is especially difficult if you are your sole employee. You are carrying soda up to the second floor lunchroom of one of your accounts when all of a sudden, you trip and fall down the steps, breaking your leg.

You will live, but you will be immobile for several weeks. Who will take over your daily activities and how will they know what to do?

List your regular activities
A first step is to create an outline of all of your daily, weekly and monthly tasks. This would include a daily route schedule, such as product ordering activities and money counting and deposit processes. Create a list of all of your key contacts, including company name, phone number and their responsibility. (Customer, product or equipment supplier, accountant, lawyer, etc.)

Determine who could take over your daily activities.

During my conversations with small operators, I have found that most rely on their relatives or close friends to handle the daily filling of the equipment and collection and deposit of the cash. The most difficult situation for most of these operators is service calls, as not everyone can repair a coffee or food machine.

This may go against the norm for some of you, but if you are a one-man operation, this may be a situation where you need to have good relations with a competitor in your city. Determine which of your competitors you feel you have or could establish a relationship with in which you would feel comfortable partnering with in case of an emergency to minimally handle service calls.

The competitor may be in your same situation in that they would need backup to handle the day-to-day activities in their company as well.

Consider talking with your equipment suppliers or one of your product suppliers who call on you and all of the other operators to get their opinion as to who could potentially help you in time of need.

Maybe someone who has recently retired from another vending company could help handle daily service calls, as they know the equipment. If this is out of the question, you may need to share your knowledge and activities with a relative or close personal friend outside of the industry.

Train your backup people on the skills of running your business and document the results, enabling you to take corrective action. Have your backup people ride with you on a route one day and then you ride with them the next day. Have them perform all of the daily activities for one day as you look over their shoulder.

Prepare for eventualities
A major personal event, which could occur at any time, unfortunately, is your death. Assume today is your last day. What would happen to your company? Would your family be financially secure? Would your spouse face the task of trying to sell the company without proper preparation?

Create a succession plan. If you do not have family members waiting to take over your business, consider who could be a potential buyer. Again, determine who would perform the day-to-day activities for, in this case, a potentially long period of time, until the company is sold.

Environmental event
A second scenario may be an environmental event such as a tornado, hurricane, earthquake, flood or fire. What would happen if such an event completely destroyed your building, your vehicles and all of the equipment and product inside your facility?

Obviously, a first step is to sit down with your insurance company and review your policy. Together, create a written analysis of the amount of money you would need and how quickly you would receive the money to repurchase product, equipment, operating supplies and rental vehicle and warehouse facilities.

If you currently operate a commissary, meet with other companies who could provide food to you temporarily and establish a game plan. You may find that certain items you are currently creating in your commissary could be produced by the other company for a lower cost, allowing you to establish a working relationship before a catastrophic event occurs.

Product suppliers in an emergency situation will look out for their customers first before accepting business from other companies.

Take a look at your communications and data processing infrastructure. A forwarding system for your land line phone system to your cell phone will enable you to receive calls from your customers in the event the phone lines are down.

Obtain backup power supplies in case of loss of electricity to eliminate the potential for spoiled food or loss of data.

Keep copies of your essential records, a backup of your computer data and contingency plan in a separate location outside of your office and your home in case of fire or catastrophe.

Have a plan for communicating with the media. Let's say your building burns down tonight and the event becomes the top story on the local news. Do you have a prepared statement that you can pull out tomorrow which will assure your customers that they can rely on your service?

Wouldn't it be great to say to the reporter, "Yes, this is a tragic event. The main thing is no one was hurt. Fortunately, we have a contingency plan in place. Tomorrow, we will be operating from a different facility. We want to assure our customers and our employees that we will be in business tomorrow, and we have planned for a minimal disruption in our service."

Outside factor event
A third scenario may be an outside event such as a food contamination situation. I was personally involved in such an event. In 1993, my hometown of Milwaukee, Wis. experienced a situation in which several people died in the metro area due to the contamination of the city's water supply by the parasite, cryptosporidium.

A real life event
As a manager for a vending equipment distributor at the time, my customers relied on me to tell them if the filters on their coffee and cup cold drink machines would provide the proper filtration.

After calls to the filter suppliers, I was able to tell my customers that the filters would handle the problem. With this information, my operator customers had the task of informing their clients and end user customers of the filtration process used on their coffee machines after the event, not before the event.

I remember many operators turning their machines off until they obtained the proper information and properly informed their customers.

I am sure the disruption in service was much longer for most vending companies in the area due to the fact that few had a plan in anticipation of this situation.

A contingency plan prepared in advance of this event would have been to create a letter to all customers to be printed after the crisis and attached to all coffee machines explaining to the customer how the situation was being handled.

It would read as follows:

"To our customers: As you know, the city water supply was contaminated with cryptosporidium. We value your health and safety. Water filters are incorporated into each of our machines which will use safe drinking water for the preparation of your coffee.

"Even though not necessary, we will be changing the filters in your machine once a week for the next month to guarantee that the coffee you drink today includes clean, healthy water. Please call us at 555-1234 if you have any questions. Thank you for allowing us to serve you."

Another major outside event could be the abrupt plant closing of your major customer. What is your plan for the lower amount of cash flow?

Should you think about focusing more on new account sales to have a more diversified client list?

Once you have a plan in place, put it to a test. Assume you are unable to work today and pay the people you have relied on to take care of the day-to-day activities for two days. During this period of time, you can see what questions or issues arise.

Assume your building burned down last night. Call the temporary warehouse people you have met and have incorporated into your plan to see where you would set up shop.

You will feel secure knowing that you have the people and backup plan in place to handle anything that may come up.

Review the plan yearly
Review and update your plan annually. Pick a time each year when you sit down and review your contingency plan. Identify new potential events.

Look at events at other companies that made the news and determine if it could happen to you. How did they handle the event?

NAMA offers informational packets, including "How to Plan, Respond and Recover," to help you plan for such an event. Having a contingency plan takes time, but in the end, it will give you peace of mind that when something unexpected does occur, you are prepared to take immediate action.

About the Author:
Scott Larkin has been involved in the vending, office beverage and contract foodservice industries for more than 30 years. His positions have included vending operations management and sales, managing software and equipment manufacturing, and distribution. He can be reached at slarkin@wi.rr.com.

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