Businesses fail. It’s a reality many of us don’t want to face because we don’t want to think about worst-case scenarios. This is because unexpected occurrences happen more often than you think. For example, there could be power outages, cyber incidents, supply chain disruptions, severe weather, or even sudden staff shortages that you must contend with.
That’s why you need to expect the unexpected, which means preparing a business continuity plan for a small business. If you have a plan in place, you’re far more likely to weather any storm that may come your way in Canada. In today’s blog, our team at Bizfund explores what you need to know about developing a business continuity plan.
What is a Business Continuity Plan?
A business continuity plan, often called a BCP, is a plan you put in place that outlines how your Canada-based company will continue operating during or after an unexpected disruption. This plan outlines how you will maintain your business’s critical operations and how to return to normal as efficiently as possible.
However, the best BCPs not only address how physical disaster recovery will be handled but also operational risks such as supplier failures, data loss, staffing disruptions, and technology outages.
Essentially, the main goal of a business continuity plan is to help your business continue by minimising downtime and protecting your essential business activities, regardless of the type of interruption.
Why Small Businesses Need One
Although all businesses need a business continuity plan, small businesses might benefit from having one in particular. This is because small businesses are far more exposed to risk. For example, a single disruption could cause your business to lose revenue, customer trust, and employee stability all at the same time. If you don’t have a course-correcting plan in place, your disaster recovery will take longer and cost you more.
In addition, if you have a BCP in place as a small business owner, you can respond better, and you’ll benefit from better decision-making. You’ll also have the blueprint you need to reduce downtime and move forward with positive customer and employee relationships, even during a crisis. Not to mention, at times, having a BCP in place can help support insurance claims and lender discussions after a disruption.
Moreover, and perhaps most importantly, a BCP can help you protect your business’s cash flow. If operations ever stop and your expenses continue, a clear continuity strategy can help limit financial damage and support a faster recovery.
Key Components of a BCP
There are a few key components of a BCP you’ll do best to be aware of. We’ve outlined them below to give you an idea of what you need to do before you begin creating your own plan.
Identify Critical Business Functions
We cannot overstate this component enough. It’s imperative that you start by identifying the activities your company cannot operate without.
Usually, these are the functions that directly support your business’s revenue, daily operations, and customer service. If you’re struggling to wrap your head around what these ‘core’ operations are, here are a few examples:
- Payment processing.
- Customer communication.
- Financial records access.
- Order fulfilment.
If you understand what must continue, it can help you focus on your planning.
Assess Potential Risks
After you identify what your critical business functions are, you need to assess the potential risks. The risks are what can disrupt your business’s operations. Often, risks can include supplier delays, cyber incidents, power outages, system failures, and loss of key staff members.
It’s also important to realize that you’re not going to be able to predict every possible event that could disrupt your business. You can’t beat yourself up over what you can’t control. However, you should still recognize realistic risks and understand how they can affect your company’s operations so that you can prepare better.
Create A Communication Plan
During a disruptive event to your business, the last thing you likely want to deal with is poor communication. The more communication you have, the better, as it can help reduce uncertainty and keep essential activities running.
That’s why your plan needs to outline how you will communicate with customers, employees, and suppliers if your business operations are affected. Often, the easiest way to ensure communication channels remain open is to decide who will be responsible for communication. This can help you maintain trust and will ensure everyone remains informed during stressful situations.
Define Recovery Strategies
One of the most important components of a business continuity plan is the recovery strategy. You need to build into your plan exactly how your business will restore operations. Typically, businesses will include a list of alternate suppliers, backup systems, remote work arrangements, and temporary staffing solutions that they can reference.
Creating Your BCP Step-by-Step
Now that you have a better understanding of the key components of a business continuity plan, let’s look at how to create yours. The steps below can act as your BCP template:
- Document Your Core Processes
The very first thing you’re going to want to do when creating your BCP is to document your core processes. This means you need to document how your company operates on a normal day. We recommend focusing on the processes that directly support your customers’ experiences, your revenue, and your business’s financial stability.
For many businesses, this means noting how they process orders, collect payments, handle customer inquiries, and manage service delivery and inventory. When outlining these processes, it’s important to be as specific as possible about who is responsible for what and why, and the tools and systems you or someone else uses.
- Set Acceptable Downtime Limits
Now we know that, depending on the disruption, you cannot control how long the downtime will be. We also understand that not every function requires the same response speed. However, it is still a good idea to assign a downtime limit for every critical or core process. You can base this on how long your business can realistically operate without it before issues arise.
For example, it may be reasonable to have a short delay in reporting of a week or two, which is manageable before problems arise. Or it might be that you need an immediate solution if there is a disruption with payment processing.
Fortunately, as long as you define acceptable downtime, you can rank your priorities and avoid wasting time debating what to fix and when during an emergency.
- Identify Backup Resources And Alternatives
You already know that it’s important to identify backups and alternatives during disruptions, as they are key components of a BCP.
When creating the BCP, be realistic when choosing backup options, and remember your goal is to reduce dependence on any single system, individual, or supplier. Even if you go with simple alternatives during a disruption, it can significantly reduce downtime and stress.
- Define Roles And Responsibilities
You already know you need to assign the communication role, but did you also know you need to define other roles and responsibilities? During a disruption, it’s important that everyone knows their place and what they need to do.
You don’t want your employees scattering and running around like headless chickens. To prevent monumental confusion, make sure you outline in your BCP who is responsible for decision-making and operational recovery as well.
If you assign these responsibilities in advance, you can ensure key tasks and duties aren’t overlooked, even during a time of disruption when pressure is high and time is limited.
- Write Clear And Practical Action Steps
You should already be compiling a document that is, in and of itself, your BCP plan, but if not, you should consider doing so. It’s important that you include all key points in this outline so that employees and you can easily reference the plan of action.
Most will make this a comprehensive, easy-to-understand document, and you should do the same. You want to avoid having to go into in-depth explanations, as you’re going to want to focus on what needs to be done, in what order, and by whom. Additionally, since this plan will steer you and others, it needs to be accessible digitally and in print.
Testing and Updating Your Plan
As many other things in life, your business continuity plan for a small business isn’t a ‘set it and forget about it’ document. It’s not a rigid rulebook but rather a plan that many will refer to in the event of a disruption. That means it needs to evolve with your business and industry, especially if any major updates occur with new locations, systems, or suppliers.
However, it can only evolve if you test and update your plan routinely. During testing, you can uncover any gaps or confirm that everyone fully understands their role. You can also walk your team through scenarios to show them how the plan would work in practice.
Financial Preparedness
Often, businesses fail to realize that financial readiness plays a considerable role in business continuity. After all, disruptions to your small business can lead to temporary revenue loss or unexpected expenses. Sadly, this is the case even when you have a business continuity plan in place.
But how do you embrace financial preparedness? It’s simple. Financial planning can include maintaining an emergency fund, working with a financial adviser, or understanding your financing options in advance. In addition, some businesses explore loans or merchant cash advances to manage short-term cash flow gaps during recovery.
Key Takeaways of Creating a Business Continuity Plan for a Small Business
A business continuity plan is one of the most important plans you need to have in place for your company. With this plan, if you’re ever facing a disruption, you’ll know what to do, who should handle what, and how you can recover.
You also now know that it’s incredibly important to test and update your BCP and that financial preparedness is an important aspect of operations. If you ever require financial support, you may want to consider Bizfund.
We support Canadian small businesses by offering access to financing and financial guidance. Our team designs our support to provide stability and growth. Through a merchant cash advance, you could have the funds you need in an emergency situation to keep things afloat.
