How to Prepare for the Next Disaster?
Note From Donna… Here’s number 4 in the series from Larissa Summers. I have enjoyed reading the topics she’s chosen to write for us, and I hope you are too. I know that some are still in the throws of financial struggles of the pandemic. It’s never easy to recover from economic setbacks, but there are things we can do to ease the pain of them. Here’s a few thoughts on the subject.
Your business survived the pandemic, how to prepare for the next disaster?
Economists generally agree that downturns and economic disasters are an expected and healthy part of our society. However, just because an economist says it’s healthy doesn’t mean it’s an experience any of us want to go through. Disasters can stall business development, deplete savings, force clients to let you go, and possibly drive you to close your business. We only need to look at the struggling restaurant industry to understand how serious a crashing economy can become. That doesn’t mean we can’t prepare for future disasters. Business experts agree on a few solid strategies to survive economic disasters: preparation, asset building, financial planning, and understanding your books all help to create virtually futureproof plans.
I can’t simply go into an article of this topic without mentioning the coronavirus, inevitably this pandemic will cause the economy to fluctuate again. Until researchers can provide the world with a definitive cure the pandemic will continue. The WHO (World Health Organization) has recommended that businesses continue to stock up on supplies for potential outbreaks. Make sure to have workers quarantine when needed, have sanitization materials on hand, and consider developing a remote workspace to allow for proper social distancing. The last two years have proven that workers can remain efficient in a virtual space, and a proper set up means your employees don’t have to stop working when an outbreak occurs. Finally, COVID19 surplus responses have left the impression that you should not rely on the US government to bail out your business. These surpluses are a great windfall to receive, but they shouldn’t be a core part for your disaster relief plan.
For non-pandemic related disasters, it’s of vital importance to remember the lessons we learned after the 2009 financial crisis. It’s time to find a financial planner and invest in assets that can generate additional sources of revenue when the economy fluctuates. Make sure your financial planner is a fiduciary, meaning they are legally required to act in your best interest. Based on market research a fiduciary will list out two options for investment: stock and bonds. You might have images of scary wealthy CEOs in board rooms when you hear these words, but I promise you they aren’t that scary. Purchasing a stock (or a ‘share’) means that a company can spend your money to further their business goals, and in exchange you can sell your ‘share’ later with the price being dependent on the success of the company. In present day, the stock market is a highly automated industry where day traders have been replaced with extremely efficient trading AI (Artificial Intelligence). If you are given the option between having a human manage your stock portfolio and an AI managing your stock portfolio you should choose the AI in every circumstance. Why? Because professional investors prefer using AI instead of making their own choices on their own investments.
Purchasing a bond essentially means ‘spending money now to get more money later’. Your accountant should be able to provide you with a formula to determine if a bond is worth the investment. However, in a financial disaster bonds become incredibly lucrative to buy and sell meaning that if you can’t get business, you can still generate revenue. There are different options for investment that a financial planner may suggest but we can’t cover all those options succinctly in one article. Before any of this happens, you should discuss with an accountant on what you can afford. Your accountant knows your business just as well if not better than you do and having financial clarity before you make plans is the key for any successful endeavor.
Allow me to ask a question: Why are you running a business? Here’s a hint, it’s not for the desirable social life, and definitely not because it’s easy. Perhaps a better question is who are you running a business for? Many entrepreneurs forget that they are creating a legacy for their children to inherit one day. In most cases, a legacy means building something you will never get to see. Business owners owe it to their future selves and whoever builds upon what they left behind to create a plan for future disasters. Because if you’re caught unprepared, you might not be able to leave a legacy behind.
Written by Larissa Summers