Expect the unexpected with an emergency fund
As a business owner, are you financially prepared to handle unexpected events? You may be ready to face a slight dip in the economy, or a loss of market share to a new competitor, but have you thought through a variety of real financial emergencies that could arise with no warning? For instance, imagine that:
- Your main supplier files for bankruptcy
- Oil prices skyrocket, inflating your transportation and delivery costs
- There is a flood or fire in your storage room and you lose all of your inventory
Would you be ready, or would you find yourself scrambling to come up with ways to deal with the impact on your business after the fact?
Being prepared isn't just about anticipating what could happen; it's about being ready to deal with an emergency. If you want to ensure business continuity, you need to manage your operations and your finances accordingly. Talk to a financial business advisor to find out what will best meet your needs and your comfort level. For example:
- How much can you afford to set aside for emergencies?
- Where and how should you invest the money you're saving?
- What level of risk are you prepared to take on?
When it comes to emergency planning, it is wise to prepare during good times, when things are stable with your business. You can start small, putting away a little bit of money each month and growing that over time. Payments can be made automatically, with a direct transfer into your emergency fund. You'll want to keep that money in an account that is fairly liquid and easily accessible. While lines of credit are sometimes used for emergencies, it doesn't offer the security that true savings does.
Don't forget to look outside your business for help; networking is a great way to make contacts who can be there for you in times of crisis, or put you in touch with those who can help.