A Single Point Of Failure Can Take Down Your Business
Based on the solution provider audiences he's spoken to, both formally and informally, Semel estimates that less than 50 percent of solution providers have a written business continuity plan and maybe 10 percent have tested it.
"A lot of plans are done by people wearing rose-colored glasses with the power on, the AC on, cell phones working and all employees standing there to tell them what they need to do. In reality, you may have half your staff, no power or cell phones for days," he said.
Semel estimates that a solution provider can expect to spend approximately $5,000 to bring in a consultant to develop and test a business continuity plan. An alternative is to find free resources such as www.ready.gov and download the templates and do it yourself.
"The problem is a lot of people get confused and distracted and don't finish the job. The one thing you pay for is not just the skill set but having the completed product and not just something you get around to," Semel said.
Here are tips No. 5 and No. 6 in preparing your business for a disaster.
No. 5: Account For Your Risk
All small businesses should know what types of emergency events have occurred nearby in the past and whether they would be affected if a neighbor's property were destroyed in a fire, according to the SBA.
The biggest hole in solution providers' business continuity plans is they haven't accounted for single points of failure that might occur, said Semel, who became interested in business continuity after watching his father's business, a consumer electronics retail company, get flooded when he was a teenager.
"It could be an employee -- your top engineer, the guy who handles your servers. If something happens to him, that's a disaster if you need passwords or system codes or encryption codes for backup to get your data or your clients' data. When you create the plan, it becomes a snapshot in time. If next week someone changes a password, the [business continuity] plan does not automatically change," he said.
The good news is that many solution providers also have a specific trait that helps them through bad times: resiliency, said Semel.
"People react in different ways, but the nice thing about the people in our business is that the owners are entrepreneurial and leaders will step up," Semel said. "Everybody should be expecting a disaster. You don't know when it's going to happen to you, but if you read a newspaper, you know it can happen. Just because you don't suspect it on a particular day doesn't mean it's not going to happen."
Sagacent Technologies' Ed Correia didn't assess the risk his company faced if he wasn’t around and it almost cost him significantly after his stroke.
The problem was that Correia essentially was the only salesperson for Sagacent. If he was out, there was no new money coming in. Existing customers could be cared for, but Sagacent wasn't attracting any new clients.
"From a business perspective, that's a damaging thing. All business has attrition. You've got to be making new sales," Correia said.
As Correia started to regain his health, he began to divest more responsibilities to other employees and build the company so it wouldn't need him if something were to happen. In addition, employees now receive cross-training and Correia has analyzed them to see what other responsibilities each could take on.
The efforts have paid off. After a decline the first year, Sagacent's sales increased 17 percent last year.
"I'm still thinking about 'what if,' " Correia said. "I survived and the company survived and not because I was brilliant. Because I got lucky."
NEXT: Know Your Alternative Vendors Tip No. 6: Know Your Alternative Vendors
Solution providers should always build strong relationships with primary vendors and suppliers, but they also should develop relationships with alternative vendors in the event a primary contractor can't service their needs. Solution providers should place occasional orders with these vendors so they will be regarded as an active customer, the SBA recommends.
The same holds true for financing partners, said Westron Communications' Dave Casey. After Casey's partner and Westron co-founder Jack Higgs died, the solution provider found itself in dire straits after Higgs' heirs pulled his personal guarantee in the company's bank credit lines.
That put the company's credit line in jeopardy, Casey said.
"Eventually something happens. It could even be a car wreck, where a person is not dead but unable to work. How do you resolve those types of things?" Casey said.
Thankfully, Westron had multiple lines of credit with vendors and distributors, which worked with the solution provider even though its bank credit line was suspended while a legal issue regarding Higgs' death remained unresolved for 18 months, Casey said.
It took Westron a couple of years to regain its balance and get back to where it was before Higgs' death, Casey said.
"It's real tough when you're running the company and people come at you with everything -- customers, vendors, employees. Sometimes it's easy to let some of those details lapse, things you think you never have to deal with like proper insurance, credit lines," Casey said. "A lot of that is planning. We all say we've done all the stuff they say we need to do, but it's not nailed down as tightly as it should be."