Creating a Business Continuity Plan: A Crucial Step in Small Business Financial Planning

• Risk management is key to your company’s long-run viability
• A Business Continuity Plan (BCP) prepares for all sorts of risks with a focus on protecting a business’s value
• Just like with a personal financial plan, a BCP eyes long-term success and risk management strategies to put in place today

We talk a lot about the long game in our blog. Indeed, small businesses need to plan for the years and decades ahead when it comes to areas like taxes, exits, and your retirement. What’s sometimes overlooked, however, is outlining a contingency strategy for when near-term interruptions disrupt your company’s operations. For many entrepreneurs, just a few days of unexpected outage time can be devastating not only to the bottom line, but also to your reputation and client relationships.

A Business Continuity Plan (BCP) is a critical document and action plan that prepares firms for disruptions such as natural disasters, economic downturns, health crises, or tech-related failures. Just in the past few years, we’ve seen instances of each of those types of events wreak havoc on companies of all sizes. Getting back up to speed quickly ensures that your cash flow remains on track, and a strong BCP can even instill added confidence with your customers, thereby making your business even more resilient.

What is a Business Continuity Plan (BCP)?

A BCP is a document and strategy designed to get a business through any material period of unexpected downtime. Disruptive events can come in many forms, and a comprehensive BCP walks a small business owner through each step, from diagnosing a crisis to communicating with employees and clients to restoring operations.

A BCP is also a kind of scenario analysis in which you as the CEO brainstorm all that could go wrong with your business; think of it like a weaknesses and threats assessment. The plan walks stakeholders through how to stay cool and manage a crisis. As Gene Kranz, Flight Director of Apollo 13 famously quipped, “Let’s work the problem. Let’s not make things worse by guessin’!”

While a BCP is unique to each organization, there are several areas that a good plan will hit on:

• Risk Assessment: Spot potential perils that could bring harm to your company (e.g., natural disasters, cyberattacks, system failures, communication disruptions).
• Critical Business Functions: Identify areas of your business that must be operational ASAP (communication with clients, delivery logistics, cash flow operations).
• Emergency Contact Information: List key personnel, vendor, and client/customer phone numbers and email addresses, including primary and backup communication protocols.
• Data Resilience and IT Continuity: Even before a crisis occurs, you can be prepared with proper tech restoration and data backup software.
• Recovery Strategies: Part of a sufficient disaster response plan includes procedures on how to get the business up and running smoothly.
• Testing and Updating: Not all the items in a BCP are about reacting after an event; regularly testing the plan and updating it as the business grows and circumstances change is imperative.

Some of my clients felt firsthand how important was to have a BCP during recent hurricanes that struck the Southeast US. A few years before, we all dealt with COVID. Bigger picture, CrowdStrike’s botched content upgrade in the summer of 2024 brought to light how important contingency planning always is. No matter the situation, an extensive and actionable BCP makes the difference between a business that survives and one that cripples during an emergency.

Why Every Small Business Needs a Business Continuity Plan

So here’s where we run into potential problems. It’s easy for a small business owner to think of a BCP as some dusty document only large corporations must have. Even if you have one, can you tell me off-hand which drive and file folder it’s in? Probably not. The truth is that none of us know when the next disaster will strike. Hence, you are not too small to not be impacted by a crisis. In my instance, a small business is even more vulnerable to interruptions and attacks than sturdy large companies.

If you’re still unsure if you need a BCP, consider these reasons:

1. Protect Your Revenue Stream

Cash flow is the lifeblood of an organization no matter the size; it is for my company. One disruption has the power to cut off revenue or sever a liquidity source. A fire, cyberattack, or, say, a global pandemic, will prevent you from operating business as usual if such an event were to occur. And you probably don’t have a dedicated disaster recovery unit, secondary facilities, or other resources that a multinational corporation possesses. A BCP might not be an elixir, but it can help keep revenue and cash flow running.

2. Preserve Customer Confidence

Your clients understand that emergencies happen, but they also expect to do business with professionals who are prepared. Reliability is paramount, and when a services provider or goods seller can’t handle and bounce back from a challenge (no matter the kind), then trust is damaged. A well-executed BCP helps ensure that doesn’t happen; it protects not just the dollars and cents of your practice, but also the confidence side of the ledger.

3. Regulations and Compliance

I partner with many small business owners who operate in highly regulated industries. For some of them, there is no choice but to comply with legal requirements with respect to disaster recovery and business continuity. A BCP serves as not only a practical backstop, but also as a legal document to satisfy a governing body. Compliance via a BCP avoids fines, penalties, and perhaps even legal action brought against your firm. Services-based entities that handle sensitive customer data may be mandated to have such added security measures in place.

4. Safeguard Your Employees

It’s not just about being on watch for external threats and satisfying the powers that be; keeping your team members and their families safe is top of mind for many of my clients. A strong BCP includes procedures for shielding your workforce during the most vulnerable times. Remote work arrangements, evacuation plans, and instructions for how to perform critical activities when infrastructure is down or limited are must-haves. This gets down to basic peace of mind for you and those you depend on day in, day out.

5. Keep in Tip-Top Financial Health

Like on the football field, a corporate team is only as strong as its weakest link. If a single threat can cripple your operations, then even the most thriving company during the good times can be shut down in short order when disaster strikes. A BCP mitigates such risks by planning for worst-case scenarios and outlining steps to protect financial resources. You can take it a step further by stress-testing your business under hypothetical situations. This is where financial planning and a BCP intersect.

Steps to Creating Your Own Business Continuity Plan

A BCP and a financial plan go hand-in-hand. It’s the usual things that help you recover faster – maintaining an emergency fund, performing regular cash flow forecasting, holding adequate levels of insurance (including business interruption insurance), and diversifying

your revenue streams – all these areas are important. To get started with a BCP, follow these steps:

1. Conduct a Risk Assessment: Go back to Business School 101 for a minute and do a SWOT analysis. Bring in members of your team to think of threats you’re missing too. Rate each of them in terms of their likelihood and impact on your business – the ones most likely to occur and harm the company should be focused on.

2. Define Critical Operations: Next, note which departments are most at risk from an interruption. This can vary by business and industry.

3. Develop Recovery Strategies: Logistically, map out how your company will restore operations; remote work, backup vendors, and secondary business locations should be fleshed out.

4. Set Up Communication Protocols: Get contact information from employees, contractors, and suppliers. Make it part of their responsibility too – buy-in is always a good thing when stress is ratcheted up.

5. Review Insurance Coverage: Here’s where a financial advisor can particularly help – periodically review your policies that cover the important bases.

6. Update the Plan: Just like with your personal financial plan, the BCP must be managed and refreshed as the market changes and your situation evolves.

The Bottom Line

A BCP is not just a preemptive document; it’s a strategic asset and tool just as your personal finance plan is. By calling out risks before they hit your business in the face, securing financial resources, and developing recovery procedures, you can safeguard your business. There are financial benefits, sure, but the peace of mind that comes with having a thorough business continuity strategy is so valuable.