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Columbia Business Monthly

I Never Expected this to Happen

By Jeff Herman

We have some very colorful sayings in the wealth management business, but the one that comes to mind presently is, "You never get hit by the bus you are looking for." I believe most people would agree we never thought the Covid-19 disaster would become this large of a calamity.

As an SEC registered investment advisor, we are required to have on file, and in practice, a disaster recovery plan. There are many things in our plan that are specific to our industry, but also several that can apply to many different industries or small businesses.

The following are some high-level issues that pretty much apply across the board: employees, supply chains/lines, customer contacts and financial preparation. In general, all are good areas to be prepared for in those "just in case" moments of life. 

Employees: Do you have an easy, convenient way to contact all of your colleagues? You may have their contact information in a file somewhere, but does that help in an emergency? Check your phone right now. Do you have all of your staff listed with a cell number? Home number? Email address? Or the big one, home address? If they are not immediately accessible, you're not prepared. 

Action Step: We all keep our cell phones with or near us at all times, so keep a list of your employees with all necessary contact info in your contact list. Maybe even think about a trusted contact attached to each employee. It's a simple step, but many people don't have this information up to date or easily accessible. 

Infrastructure: It is the backbone of almost every business, but it can be the easiest to overlook. The world has become a "just in time" supplier of almost everything from auto parts to bakery items. Do you have a plan B if one of your suppliers runs into any possible issues? Can your business survive with the loss of a key supplier? Do you have an alternate provider? 

Action Step: Obviously, the answer is to have backup suppliers that you can turn to in an emergency or work with multiple vendors while things are going well. If that is not an option, spend some time developing your plan to alter your product or service based upon any temporary supply chain disruptions you may have.

Customers: Are you prepared to communicate to your existing customer base letting them know the status of your business: open, closed or "working on things"? Do you have a list of your top 10, 25, maybe even 50 customers; and are you able to access that information easily? Is it stored in physical files or cloud-based? During this shutdown, we have seen firsthand that businesses who can communicate the state of their business have succeeded. 

Action Step: If you are a retail business, consider developing a loyalty program, as it is the easiest way to gain contact information. Then invest some time and money in contacting them regularly. 

Financials: This is a big problem for many businesses. Through working with many businesses, we have seen a lot of great business people who excel at their craft, but are also lacking in their financial preparation. It's not only important to understand the profit margins in your business, but also to have that information up to date. Having complete, readily available financial information in an emergency is invaluable. 

Action Step: You need to have all of your financial records up to date and also make time to meet regularly with your team. I'm not talking about your staff, but your financial team consisting of a banker, insurance agent, investment manager or general business advisor. Another big concern is that most businesses run very lean on cash flow. To prepare for the unexpected, we ask clients to accumulate enough savings to cover six months' worth of expenses. This may seem like a shockingly high amount of savings, but it is better than going out of business during the next "disaster."

Owning and running your own business can be very rewarding, while at the same time nerve-wracking. Planning for some unseen events can help you alleviate a few of those concerns. Just watch out for those buses.

Jeff Herman, a 30-year veteran of the financial services industry, is an Equity Partner with Wagner Wealth Management. He can be reached by email at Jeff@wwmadvisors.com. Securities offered through Triad Advisors, Member FINRA/SIPC. Advisory Services offered through Wealth Management Advisors. Wealth Management Advisors is not affiliated with Triad Advisors.