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8-Nov

What disruptions cost small businesses?

Shutting down a small business – even for a short period – can end up costing more than you’d think. We look at some of the consequences of a disruption to service…

Balancing the books of your small business takes time, and can be pull-your-hair-out frustrating. Margins are tight, income variable and clients unpredictable.

So when you add into the mix an unexpected disruption, it can make a tough time nearly impossible.

High Impact Solution or Communication

Here’s what a short disruption could cost your business and a few ways to help manage such cases…

Loss of cash
This is the big problem. Even if you’ve some cash in reserve, stopping the business will hit cashflow on a number of levels.

According to a survey from Direct Line for Business, the average cost of keeping a small business afloat while unable to trade for two weeks after a disruption is estimated to be £8,775.

It also found that an average small business or sole trader could last for just under 9 months if it were forced to stop trading.

But this would result in a reduction in profits and revenue and the possibility of having to invest personal cash to keep things afloat.

What you can do…
Having some emergency reserves of cash can help to keep a business going. For worst-case scenarios, only if you know exactly how long the disruption will last, a loan could cover the running costs.

Both of these would mean, however, that you’d need to adjust your business model for when you get back up and running to take into account the additional costs and how to pay them back as soon as possible.

Loss of custom
The Direct Line survey found that 39% of small businesses were worried about a loss of customers during down time.

And it’s a valid concern. The competition among small businesses is fierce and it doesn’t take much for a customer to change their mind. Getting them back when you’re up and running can be tough.

What you can do…
First you need to reassure your customers you will be back. Give them a realistic timescale and stick to it. If you go over, they will probably disappear and you won’t get them back.

Second, you could offer discounts or offers to those that stay loyal, or to get customers that have gone elsewhere to return. Again, this will cost you but it might be worth it in the long run.

Finally, speak with people who could provide a fill-in service for when you’re facing disruption. This could mean bringing in a freelancer to cover the work.

Staff retention
Depending how long you’re going to be down for, it can be hard to keep staff.

If they fear your company is not going to recover fully, they might seek work elsewhere – especially if it gets to the point where you’re unable to pay them.

What you can do…
Like with customers, you need to reassure your staff. If you’re still able to pay them, then that’s fine. If it’s only for a couple of weeks, consider offering them extra holidays over the period.

For longer-term disruptions, or if you’re unable to pay them, try and organise some freelance work for them while you’re away. They could use this to cover their own costs and then return to your company once you’re back up and running.