How to Prepare a Business Survival Plan

SMEs (small or micro businesses) are particularly sensitive to both good and bad fortune – large profits can turn into losses very quickly when an unforeseen hurdle is hit.

The majority of businesses can be saved by rigorous action as soon as directors realise that there is a problem, rather than burying their heads in the sand and letting debt accumulate.

We have broken down the steps you should follow to get your business back on track.

1. Prepare a current profit-and-loss statement and cash flow analysis

The most important thing is to educate yourself – you can’t do the planning or take the action that will be needed to turn around a company unless you fully understand your business’s key numbers. Make sure you write it all down, focusing on the key areas that are causing you problems, work with someone on it and then you have extra eyes. 

You wouldn’t attempt completing an obstacle course blindfolded, and you shouldn’t try to create a business plan without knowing the figures – it won’t be pleasant.

2. Brainstorm your next steps

If, for example, your sales have been down by 20%, your plan should calculate how your business will return to profitability through cutting costs, increasing sales and maintaining an adequate profit margin.

Ensure that you record every last detail of your plan, including your forecast of how many months it will take to return to normal functioning.

It should include details on your planned actions in the short, medium and long term…

In the short term: 1-6 months

In this initial period, your aim should be to get the business at least back to a breakeven point. As a rule, companies that forecast to take longer than 6 months to break out of debt should start proceedings to close.

The only principal exception to this rule is in cases where you have an investor that is willing to inject money into the business under a long-term turnaround plan.

Medium term: 6-18 months

If you are able to return your company to breakeven within 6 months by making the cuts necessary, you’ll then need to focus on returning your business to profit. Usually this is achieved by utilising cost-cutting methods and adopting new marketing initiatives.

In some cases, though, especially if the industry your business belongs to is in a deep recession, the best you may be able to do during this next year is to continue to break even.

As long as you can survive on the proceeds and your team advisers conclude that the business is still viable, sticking with it may make sense.

Long term: 18 months onward

Your long-term plan must return your business to profit. No matter how much how much you believe that the company you have worked hard to build will eventually succeed, a business model that is not making money will categorically not have a long-term future.

Cutting costs and increasing marketing may keep your business afloat, but investment in novel strategies to see your business grow will greatly enhance the chances that it will return to solid profitability.

3. Establish an advisory board

This is a small group of knowledgeable small business advisers, people with enough entrepreneurial experience to understand your profit-and-loss statement and to review and challenge your survival plan. Your plan should be looked over and agreed between everyone that is trusted.

It is easy to overlook certain details when you have been deliberating the fine details of your plan alone, so some outside perspectives will certainly be beneficial.

Try to think of your business plan as a risk assessment – work out all the things that could possibly go wrong and plan the actions you will take in the worst case scenario.

The trick then is to stick to the plan and avoid overspending when everything does not go wrong; saving money for another rainy day may prevent you from being in a similar position in the future.

Next steps

If you would like to find out more about how to create a survival plan for your business why not book a free strategy consultation with one of our advisers, email us on [email protected] to arrange a video call.