According to FEMA, only 60% of small businesses reopen after a disaster. The U.S. Small Business Administration (SBA) continues this timeline with the finding that in the two years following a disaster, over 90% of businesses fail. Only 10% of small businesses have the right flexibility, focus, and accountability to make it two years past a disaster. A lesson from virtual planning can help you be among that 10%.
When I talk with leaders regarding disasters, it’s easy for them to think of earthquakes (we don’t live in that part of the country), floods (we aren't in a flood zone), and fires (there’s no history here). Occasionally they think of things that they deem unlikely—like terrorism, war and pandemics like COVID-19. Rarely does a leader think about other incidents—like burst pipes, roof leaks, discovery of black mold, ransomware, computer hacks, etc.—as something catastrophic to their business. Yet any of these disasters may cause business failure.
Leaders overlook that all events, not just the large ones, threaten business survival, and they will have economic and emotional impact on the team. I’ve suggested disaster and emergency preparedness to clients for years. In this time of uncertainty, leaders seem more open to hearing this advice, with many attending disaster/emergency webinars and online sessions.
While having team discussions and attending sessions are useful, solving today’s pain may cause long-term damage to your company. I refer you to the SBA figure of 10%. Only 1 in 10 companies make it two years beyond a company disaster, meaning 90% of companies fail within two years after a disaster.
The number one reason that 90% of companies fail to make it more than two years beyond a disaster is that they plan to exit in a disaster vacuum.
To survive, you must prepare for emergencies and take steps to prevent, minimize or insure against the negative effect of disasters. Additionally, you should investigate suppliers and consider ways to protect your company from their disaster. You may identify tier 2 or tier 3 suppliers as a form of business insurance. However, you still haven’t placed your company securely in the 10% club during (or immediately after) the disaster. You likely won’t be a survivor and thriver two plus years after the disaster dust settles.
You may heartily agree on the value of 3-5 year strategic planning. It’s estimated that effective strategic planning can help your company grow more than 30% faster than you would without, so says an aggregated 2010 research study on the business growth of 11,046 companies. So, what is this disaster vacuum during planning?
I’ve had a front row seat (and shared the playing field) with executive teams around the world. During this year’s crisis, I’ve seen a natural tendency to throw out the strategic plan. I've heard, “None of it makes sense in this new environment; none of it is relevant. We don’t need to meet weekly to discuss these things, because knowing what we now know, this would never have been our plan.”
The above thinking is natural yet I urge you to resist the tendency. Do not delete your annual or strategic plan. I wrote about alternative approaches in a previous blog, "Priority ZERO: Make COVID-19 Part of Your Survive, Recover and Thrive Mentality." Yet, we still aren’t at the core issue causing 90% of businesses to fail after a disaster. This is where a lesson from virtual planning will keep your company out of trouble.
I’ve experienced that virtual planning has the benefit of better team focus, less sidebar conversations and more deeply considered results. It was during a virtual planning session that I came to my hypothesis. I hypothesize that every leader plans to survive, recover and thrive from the disaster, yet it often occurs in a disaster vacuum—that is, leaders are only looking for a way out...not the right way out. The tendency is to choose a way out that relieves the disaster pain quickly but without consideration of whether it takes one farther or closer to the desired future.
When you’re in a burning house, there are many ways out, yet all ways out will not take you toward overall safety. Out the window onto the balcony of the 40th floor of a burning building will only delay the inevitable; it is not a direct move to overall safety. In the case of business, the overall safety is your peak, your priority, your big goal, or perhaps it’s your BHAG.
When planning to overcome a business disaster, always consider your options (the ways out) within the context of your long-term strategic plan. When the disaster is over and you’ve survived, when you have begun to recover and are thinking about how to thrive, you’ll discover that you’re still on the path to overall safety—your peak or long-term goals. That’s a lesson from virtual planning that will keep you and your company out of trouble!
Bonus Virtual Planning Resources: How to Prepare for Virtual Strategic Planning and Virtual Strategic Planning Meetings: 7 Tips for a Great Strategic Planning Session
Interested in learning more about your 3 year strategic plan or virtual planning?
How to Prepare for an Effective Strategic Planning Session
Rhythm Systems Quarterly Planning Resource Center
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Brinckmann, Jan & Grichnik, Dietmar & Kapsa, Diana. (2010). Should entrepreneurs plan or just storm the castle? A meta-analysis on contextual factors impacting the business planning-performance relationship in small firms. Journal of Business Venturing. 25. 24-40. 10.1016/j.jbusvent.2008.10.007