Note: This is the first of a three-part op-ed series from ANZ on key trends among Australian small business owners and how to prepare for the next disruption.
The past few years have been challenging for business owners, with price increases, inflation and ongoing issues relating to COVID-19.
Despite this, since June 2021, there has been a 15 per cent increase in the creation of new Australian businesses with one to four employees, according to the ABS.
When I speak with small business owners, I regularly hear that they are juggling competing priorities. Understanding and mitigating business risk is not always the top priority. However, if the past few years have taught us anything, it is that being financially ready for business disruption is a surefire way to be prepared for the unexpected and navigate changing business environments.
Risk comes in many forms, and it’s important to understand the different types of risk your business may attract so you can plan for them. A business risk assessment involves analysing a range of factors, including the type and level of risk and the likelihood and consequences of that risk occurring.
If you don’t already have your own risk assessment method, a good place to start is with ANZ’s risk assessment checklist. It’s also a good idea to consider external factors that may have an impact on your business; use frameworks such as ESTEMPLE to help identify the most important factors:
- Economic
- Social
- Technological
- Ecological
- Media
- Political
- Legal
- Ethical.
Recently, Australia has suffered floods, bushfires, cyclones and the ongoing pandemic. Disasters can devastate communities and small businesses too – even causing some businesses to permanently close. Having a disaster plan in place and ready to go before any unexpected events happen is an important risk management strategy that can minimise potentially devastating impacts.
While each small business is unique, many of the challenges of owning and running a business are universal – and disasters can strike at any time. Being prepared for the unexpected is key to identifying, mitigating and avoiding business risks. Being financially resilient in business is more important now than ever. When sudden unpredictable events bring financial pressure, it’s important to have systems and processes in place to respond.
Developing an emergency response plan to keep your employees safe and your business secure is a precautionary measure that could make all the difference when it matters.
Your plan should include the following:
- contact details for staff members, including their next-of-kin and emergency contact person
- evacuation plan detailing a meet-up location that’s a safe distance from your business premises
- clearly assigned roles for staff to carry out duties as evacuation team leaders or fire wardens
- emergency plan and evacuation training for employees
- insurance company contacts, including policy numbers and relevant phone numbers
- supplier lists so you can purchase the replacement equipment and materials you need to rebuild
- a detailed list of all equipment and vehicles to support insurance claims.
Depending on what type of business you run and where it’s located, having a tailored emergency kit is important and its contents will vary. A first aid kit, torch, spare batteries, disposable masks, and hand sanitiser will make up a basic kit.
If your business operates in more remote terrain, a compass, satellite phone, GPS, fire blanket, paper maps, drinking water and other supplies might also be necessary.
Paper documents can be lost or destroyed during a natural disaster like a bushfire or flood. Keeping your essential financial and business documents (including insurance policies) saved in the cloud, on an external hard drive, or as hard copies located in a separate location from your business will make accessing your data easier when applying for loans or disaster relief packages.
Understanding what government support is available for you and your business is important during these times, especially with COVID-19 and disaster relief payments, grants and rebates being introduced in recent years. These may be specific to your business size or sector. Carrying out research is important to ensure you capture all support and incentives available.
How you communicate during a crisis can make or break a business. Having a strategy in place for communicating when a disaster or unanticipated event occurs will keep your clients and suppliers informed during a critical time.
Consider creating a range of pre-written statements or email templates for staff to follow when an emergency strikes. Using social media can help you quickly communicate en masse, which reduces the burden on staff to answer phone calls and emails from customers during periods of high stress.
Sometimes being a small business makes it easier to be agile and flexible when it comes to adapting to changing business environments. A small business can often introduce new initiatives quicker, giving them an advantage when unexpected events impact day-to-day business operations. Having a clear business plan, a good view of your business operations, and an understanding of which suppliers and customers are critical to your business can help you make quick decisions when required.
By communicating clearly and frequently with customers and suppliers during challenging periods, your business will hopefully be more likely to retain those relationships when the situation normalises.
Finally, unexpected interruptions can spell financial trouble for your business, whether it’s a pandemic, global conflict, stock market meltdown or supply chain breakdown. Even if your business is currently in a solid financial position, there may be times when you need to access additional funds quickly.
One option to consider is applying for a business overdraft. Interest and fees usually apply to overdrafts, so you should discuss with your accountant or business adviser what you need in place to manage these kinds of financial contingencies.
While the pandemic was unprecedented, we learned a lot from the businesses that navigated and adapted to new ways of working and these practices continue to influence Australian small business ownership.
If you’re financially ready today, and ready for what’s coming tomorrow, you’re well-placed to weather the unexpected. Your bank can help with that and strengthen your financial resilience. The ANZ Business Hub website has many articles, templates and planners that can help prepare you for business-related risks based on your industry and output.
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