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Rising from the ashes: What to do when disaster strikes

Friday, 04 February 2011 00:00

Benjamin Dyer of of ecommerce specialist, Actinic looks at ways to rise from the ashes if disaster strikes your business. He covers:

  • Recovering lost data from a corrupt computer
  • Handling the loss of key personnel
  • Dealing with a cash flow crisis.

In my job, I get to speak to an awful lot of online business owners. Most of our customers are self-made businessmen and women, some are start-ups, and a few of them have grown the business from the front room all the way to large-scale enterprises. However in this economy for every success there are far more businesses going under – around 45 per day in 2010 according to the Insolvency Service. But some of the most encouraging business stories I’ve heard in the past few years come from those that have successfully transformed their business, or recovered from the ruins.

IT meltdown

As businesses grow, and depending on your offering, reliance on IT often grows with it. A former colleague, obsessed with backup and operational resilience, once described the increase of technology in small businesses as a ticking time bomb. I can instantly think of several successful companies that have been completely derailed, or worse taken out of business, by failure of their IT systems.

Gartner published a report on small businesses highlighting the dangers of losing mission-critical data. The sad fact is that seven out of 10 small firms that experienced a major data loss went out of business within a year. The report also estimates that 60% of all mission critical data loss is down to hard drive failure. However it is often possible to recover data from corrupt hard drives.

The answer of course is to have both a reliable system and back up process in place. But if you have lost important data there are steps you can take to try and recover it.

  • Try UNIX command, ‘dd’ to read your bad drive and compress the output. There are lots of examples of how to do this on the web.
  • Programs such as Data Rescue can often recover data from damaged hard drives as well as accidently deleted files.
  • Hire a data recovery service. However prices can be high depending on the type of disc and data you are looking to retrieve.
Losing a key employee

Every business has key personnel and losing an important member of the team can be devastating. Employees leave, it’s a fact of life, but how can a business recover if a critical cog suddenly vanishes.

  • Identify a natural successor, choose another employee whom you can rely on and challenge them, with the appropriate reward, to step up and fill the gap. The key is to do this quickly and decisively. Even better do this while key staff are in situ.
  • Sometimes it’s just not possible to find a natural successor and then you have to hire. Even consider an interim manager who can learn from the outgoing employee during the notice period and then hand over when the perfect candidate is found. The good news is that in this economy there are some really talented people looking for work. If you hire correctly and have the right incentives in place, it’s amazing the energy that fresh blood can inject into an organisation.
  • Another option is to bring in a consultant. Many consultants pride themselves on being able to understand businesses problems, systems and processes quickly, as well as remedy any problems they face. This is by far the most expensive option but often guarantees the quickest results. Perhaps identify a member of staff to shadow the consultant and learn the role that way.
Cash flow crisis

Ultimately a business is measured a success or failure by one thing: cash. Managing cash can be very difficult, especially for a start-up operating on a recurring revenue model, or businesses in the process of transitioning to them. The promise of jam tomorrow can be infuriating.

But if the cash runs out, what can you do to stop your business from going under?

  • The obvious first port of call is your bank. It has a vested interest in your success and if you can demonstrate growth or identify why cash flow has been problematic it will often have ways to help. Go prepared and don’t be scared.
  • If your cash flow crisis is down to a lack of short-term working capital, investigate working capital loans, these generally come in two formats: factoring and a more traditional capital loan. Factoring is when a lender purchases your receivables (invoices) and then makes money by keeping anything collected, or paying you less an interest charge.

Traditional working capital loans are a little different as you continue to own your receivables and instead grant an interest in them to the lender. Both can be very effective.

  • Very often the most expensive asset a business has walks around on two legs. Cutting staff is an emotional event and unless managed properly can cause long-term damage to your business, but redundancies are an effective method of cutting overheads quickly. Do take HR advice on managing this.
  • You don’t have to be a Facebook to raise funds. If your business is high on potential but low in cash then you’re probably ripe for venture capital or business angel investments. This isn’t a quick process; if you think you fall into this category I would encourage you to act before the cash runs out. It’s really sad to see companies with great potential going under because they ran out of time.
  • Chase your debts! Is there anything more irritating than being owed money, especially when you need it? If you’re struggling, hire a debt collection agency. Agencies are often paid on results, so it’s in both parties’ interest to get in the cash.
Conclusion

Running a business is hard. It’s a sad fact that only one out of three start-ups even get to a point they can trade and many established businesses go under, often due to preventable issues.

Ensuring the best practices and processes are in place to protect your business is the key skill for any business owner. However if it all goes wrong there are ways out of the dead pool before the vultures start circling. Good luck!

Written by Benjamin Dyer, director of product development at Actinic. Originally published on BusinessZone.