Contingency Planning for a Small Business.It isn't easy is it ?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Calling all other owners of small businesses.
What are your contingency plans ?
We've analysed our operations & stocking up on raw materials & office supplies was the easy part.We are internally compliant.Office machines only.. but at the end of the day we are dependant on water,power,telephone,big institutional accounting systems,banking & delivery systems. To give you some idea of just one problem.We use in excess of 1000gal of "drinking water quality" a day.
We do not expect a normal level of demand as we anticipate state & county spending is switched to more vital matters.
Our ultimate contingency plan.??? Be prepared to close down for the duration rather than bleed to death financially trying to keep open "as usual".In other words hibernation.
We have built up our stocks of finished raw material & encourage customers to order before end of November so we can be paid before Christmas.
Your strategy ?????
-- Chris (email@example.com), September 26, 1999
Being a service provider, I can only ensure that my own computer (I only need one) is compliant, which it is, and make sure I have the necessary supplies/equipment needed. This I have done.
I am totally at the mercy of the oil companies...without gas for my vehicles to get to my customers, I am sunk. In fact, if gas prices go through the roof I am sunk. This, of course, assumes that the companies that I do work for can keep THEIR doors open. From what I have seen, I believe most of them will but I will lose a couple of them.
My contingency plan is in the pantry and in the woodshed!!
As an aside, my wife is the Maint Supv for all county-owned buildings. She gets to spend the night at the county government complex on new year's eve. The county has a huge generator for this building, but it will only run for 8 hours on the fuel storage tank they have, and that providing only emergency lighting and nothing else. Gunna be interesting.
-- Don Wegner (firstname.lastname@example.org), September 26, 1999.
Don, You made a very good point.Very little is heard in public about a small business's vulnerable exposure to the success or lack of Big Brother's remediation efforts.I for one,am really fed up with all this constant barracking of small businesses...especially when big companies make idiotic judgement calls on a regular basis.Trouble is none of the CEO's have to find the money out of their own pocket when things go wrong !!
-- Chris (email@example.com), September 26, 1999.
We have two truely small businesses, both with under 5 employees. Neither business, in and of itself, _needs a computer to function, in fact less time might be spent on bookkeeping if the books _weren't spread on computer.
The one business is prepared for raw materials interruption, always has been. But that business is totally dependant upon electricity, telephone, USPS, shipping (UPS) and banking, and upon upscale and vacation types for the purchase of the product. The retail outlets, galleries, who sell the product are dependant upon smoothly functioning society.
The other business is a small tavern and grocery store catering to locals. Rather impossible to achieve any meaningful stocking level, it is all JIT - (& the county taxes year-end inventory, creating incentive for low stock levels). Refrigeration and coolers are a problem if we experience brown-out burn-outs.
If many people lose their jobs and the normal unemployment checks don't come, those people won't buy goods. If small bills become difficult to come by, another impact. If banks become fritzie, ditto. On and on.
All situations culminating in not enough cash inflow to produce personal crises in the business and home mortgage front.
Both businesses, neither directly in need of computers, both absolutely totally dependant upon a smoothly running society at large. And what sort of CP will realistically deal with that?
The art business can hibernate if necessary - (& I anticipate considerable loses from non-returned good from businesses going belly up). But the tavern/store, I dunno - it is real time. And the mortgages? They are real time.
Business continuity plans make more sense. Contingency plans imply a return to normality in their very concept. BCPs imply such a level of disruption that one plans the means just to keep a business going _at all - much more relevant to y2k imo.
My real hope, and it is only a hope, is that if things get bad enough where mortgages are threatened deals will be worked out, much in the same way that happened in Calif when the real estate market trashed and homes were valued at less than the purchase price. So many people were involved in the crash that to foreclose the mortgages were exactly _not_ in the best interest of the mortgage holders, and if they had foreclosed it would have been against the very people the holders consider the best risk for loans and home ownership.
Like I say, it is a hope. btw, no way the mortgages can be paid off prior to y2k.
I'm anticipating that many of the people i see regularly will be without jobs. That is how i'm pushing prep these days, too many just don't get it about the web of computers, but almost everyone understands what happens when small businesses downsize or shut their doors - and their propensity for belief & trust in the govt figures for small businesses is greater than it is for FEMA, US Senate, high PR figures, etc - maybe that doesn't make sense but I go with what works these days.
-- Mitchell Barnes (firstname.lastname@example.org), September 26, 1999.
Our S.B. contingency plan---immediately dump as much liquidity as possible into gold options to expire around mid Nov.
Hold tight on all expenses and slowly drain cash from the account while putting as much as possible on VISA,AMEX etc.
Get $1000.00 bags of quarters .
Contemplate what I'm going to do in a depression--with 60% to 70% unemployment. Kiss your Small business goodbye ladies and gentlemen.
Just a few thoughts,-----I also recognize none of this could happen , in which case Ive made money on gold spikes and turn in all my cash and coin and eat my food. Big deal.
All the while realizing two important things. 1."the best laid plans of mice and men.......
2. If everyone does what I will do then we have created a self fulfilling prophecy, which is human nature. CAUSE And EFFECT
-- D.B. (email@example.com), September 26, 1999.
Oh well, Glad to see we are not the only ones staring into a black hole & going Ah Sh.......t.
Been going 10 years through good & bad times & we shall be dammed if we let the business fold completely.Working on the principle that he/she who runs away lives to fight another day !On the other hand there may suddenly be a huge demand for handmade watermarked toilet paper !!!
-- Chris (firstname.lastname@example.org), September 26, 1999.
Y2K hit us early. Some major clients (international organizations) who upgraded accounting systems of the SAP kind are at 60 and 90 days past due. Other clients depending on sophisticated accounting systems are also having problems. The delays started in April and the duration of the delays have increased, and budgets have also been substantially reduced. Manual work arounds (hand-writing checks) is not happening because "payment is in the system and it will be processed at some unknown date, therefore hand-writing a check would be constitute overpayment." We continue to provide services with continued promises to pay, but this will stop on December 1, 1999 at which time we will only provide continuing services to those who are current and pre-pay.
Any destabilization of the stock market and banking in the immediate future is a serious concern to us as this may mean that back payments might never be made and there may be no work for us. As it is, we are struggling along, ferociously cutting overhead to the barest minimum, and making personal sacrifices to keep going until back payments are caught up. Contingency plans to update and upgrade computers and other systems are on hold, but the Taiwan disaster and its impact on prices may negatively impact our ability to make those updates and upgrades. Some of our vendors, service providers, consultants, and freelancers have gone 60 days unpaid. Most of them are willing to go to 90 days, but not one day past 90 days. And some will never work with us again.
After many phone calls, our bank is 90 days late in providing basic information about the Y2K loan for small businesses. At 30 days, the manager still didn't believe me that such a loan existed. After I faxed him information on the loan, he said he'd contact HQ immediately and get back to me. By 60 days, we didn't have quite enough capital to put into a new account at another bank and make the right impression (if we were to apply for the loan elsewhere). Someone from HQ called and said that they would be happy to offer us a different kind of loan, but didn't know anything about the Y2K loan. I faxed them the same materials that I had faxed to the manager. 90 days later, no one is returning my very polite messages left on several voice mail boxes.
We have back up power systems for our computer systems. We can operate for three 8 hour business days (if we can stand the power out warnings beeping every 5 minutes) after which the back up systems require 48 uninterrupted hours of recharging. The home office is equipped with aladdin incandescent lamps and, hopefully, will be fitted with a wood stove by November. Telephone service, internet connection, and other service providers are required for the performance of client work. However, our technology-based communications services won't be needed if our clients can't go to business meetings, publish materials, etc. Due to this concern, office supply inventory is limited to 3 months before new inventory is needed: paper, laser printer cartridges, etc.
In the event of serious disruptions to the local infrastructure and durations beyond three to fourteen days (but far short of a Milne style 10 where Mad Max begins his journey), we are working with an independent CPA firm to outline milestones of success and failure. If we arrive at a certain pre-determined point of losses and failures, this company shuts down until further notice and I notify shareholders of such action. At that point, recession or depression, we do what we gotta do to pay the mortgage, buy groceries, and succeed as human beings-- if not also suceed in a business venture appropriate to the climate. As Diane often writes, shift happens. Be flexible, keep an eye out for new and expanding opportunities, and keep on keeping on.
It is true that we have been brainstorming and developing business ideas for depression-climate opportunities, We also made some initial investments into champion stock, show-and-breed-quality guard dogs when we had the opportunity. This business possibility, however, will have to wait until 4Q 2000 when these now cute puppies will be mature enough for breeding and can demonstrate intensely fierce loyaties. We are developing marketing materials now to be printed prior to December and thus avoid the question of whether or not there will be affordable 4 color printing next year. Of course, there are hard copy business plans for this. As for other opportunities, further market study into Great Depression is needed. It'd be great if we could combine heads.
Sincerely, Stan Faryna
-- Stan Faryna (email@example.com), September 26, 1999.
Just curious--with your customers that our hanging out 90 to 120days. why don't you factor their invoices. Most factors only charge 5% to give you up to 75%receivables up front. Of course your customers have to be squeaky clean. Just a thought!!
-- David Butts (firstname.lastname@example.org), September 26, 1999.
I hadn't heard about factors. If they are unlike a collection agency, and they are willing to wait for payment and appropriate interest, this may be the way to proceed. In the event that Y2K is no big deal, we need to keep these clients, and from past experience... collection agencies have been the fastest way to end a business relationship. Could you explain the process a bit more? I'll also look into it on Monday.
Sincerely, Stan Faryna
-- Stan Faryna (email@example.com), September 26, 1999.
...& the county taxes year-end inventory, creating incentive for low stock levels...
Somehow in all the Y2K reading I've done, I haven't heard anyone mention this incentive to have lower than normal stock at year-end... which will run smack into higher than normal demand at year-end.
I would think this will affect a whole lotta businesses, right? And suppliers of businesses. Let's just stress that J.I.T. system to the max, right? Can everyone predict just how much increased demand for their product there will be because of Y2K nervousness when all the PTB are cautioning that it has all been fixed and no one should "hoard" anything anyway? Especially for "speciality" items (like generators and water filters) how do you have "just enough" to meet demand for a never-happened-before event... so that you aren't left with a large stockpile of things you don't want to claim on inventory, and things that will be totally useless if there is no disturbance after New Year's Day.
Just another fly in the ointment. Another monkeywrench in the gears.
-- Linda (firstname.lastname@example.org), September 27, 1999.
Stan & David,
re factoring of invoices.We have never had to do this but have considered it.The thing that sticks in my mind is that in the Uk there are two levels with charges reflecting the amount of work the factor has to do, in theory, to recover the money.BUT in both cases the customer(you) has to send follow up reminders if invoices are not paid by the due date.As this is part of the contract with the factor,it could pose problems if the mail goes down next year.
As with everything,got to read the small print but does sound as though it might be a viable strategy.
Stan,have you thought of approaching your customers..the decision maker not the accounts dept,and asking they can order after receiving a pro-forma invoice or will agree to a shorter account period.We did this & were amazed to find:
1.Not all big institutions pay out just once a month...some have weekly cheque runs.We had assumed payment was only once a month & had offered 30 day account terms.Stupid !
Basically in a big company we have found that it is the admin that slows down payment not the lack of cash.
2.Provision of payment on pro-forma invoice is normal for businesses using small overseas suppliers so providing new terms are approved by your customer the accounts dept just operate per the instruction.No hassle.
3.Regarding existing unpaid invoices,somehow you have to get to the top of the queue for payment.We have found that a softly softly sympathetic approach sometimes works.One account dept sympathizing with another over problems & asking whether there is any way around the problem at all as you have a small company & it is vital to maintain cashflow.Alternatively tell the guy that placed the order & point out that unless you get paid you maybe unable to provide him with the same level of service in the future.They usually end up really embarrased & send a flea down to the accounts dept.
All this may not help but has worked for us in the past.
-- Chris (email@example.com), September 27, 1999.
I have left voice mail with our attorney, cpa, and our local chamber of commerce asking if they know anything about factoring. Hopefully, I'll get a call back from someone by this afternoon. I'm actually surprised that the cpa didn't suggest this 30 days ago as they work with us a great deal on our business planning and we had discussed these problems in some detail.
I see this kind of breakdown (non-payment, that is) as much a computer problem as it is a management problem. Nor is this a singularity; thousands of *viable* small businesses and medium size companies have the same problem. The inadequacy and inflexibility of various policies to address computer problems at this point in time suggests that they won't do any better in 2000.
I imagine that many organizations will do worse in the terrible face of multiple minor system disruptions; their gross dependencies on computer systems and policies-practices that are based on computer functionality without regard for computer error, leaves them unready for Y2K. This is a good opportunity to test some of those contingency plans we hear about. I doubt they see the window.
Our contacts (the people signing off on estimates and invoices) are very clear about the situation and completely sympathetic to us. They are frustrated; they call down to accounting on a weekly basis and remind their people that we are urgently waiting for checks due from months past. Communications don't seem to be the problem. Computers and administrative policies are the problem.
Sincerely, Stan Faryna
-- Stan Faryna (firstname.lastname@example.org), September 27, 1999.