A crisis has the potential to shift the way you conduct your business and the way consumers behave. Each crisis ranges from mild to severe depending on the industry you are in and your business needs.
While you may not want to think about a crisis happening, it is essential to keep up your business needs during a crisis since more than 90 percent of businesses believe a crisis will hit their business within the next five years.
What Is a Business Crisis?
A business crisis is any event or series of events that occur and disrupt a business, resulting in some sort of danger or extreme difficulty. Crises in business often force executive decision makers to take action quickly in a situation where advanced planning is not possible.
Here are a few common crises that have the potential to impact your company:
- Natural disasters: hurricanes, earthquakes, tornadoes, floods, and others.
- Outbreak of disease or infection: Viruses and other things that pose serious health concerns.
- IT system failure and cybercrime: attacks by hackers, system outages, computer viruses, etc.
- Loss or illness of essential staff: death of significant staff members or serious illness resulting in incapacitation.
- Ethical misconduct: something occurs within your company that requires some legal action or other reprimand due to ethical misconduct.
- Fire: accidental or as a result of arson.
- Vandalism or theft: products or equipment are stolen or destroyed.
How a Crisis Impacts Your Business
According to a 2019 Global Crisis Survey conducted by PwC, at least one crisis has been experienced by almost 70 percent of business leaders – with most leaders experiencing three crises in the past five years. This means a crisis is very likely to impact your company – if one hasn’t already.
There are endless ways a crisis can impact your business because they often have a chain reaction that may affect multiple parts of your business at differing levels of severity. And the impact a crisis may have on your company depends on the industry you are in and the marketplace you inhabit.
PwC stated that the greatest impacts that a crisis had on businesses were business relationships, reputation, employee morale, economic loss, and legal issues.
Each of these impacts were reported by over 55 percent of survey respondents. Some other impacts companies mentioned include environmental consequences, new laws and regulations, and political change.
Most respondents faced a great deal of marketplace disruption, while others were able to benefit from the crisis and report that they were “in a better place” post-crisis. Others reported significant revenue growth, which proves that sometimes a crisis can have a beneficial impact on your business.
Other Common Impacts a Crisis May Have on Your Business
It can be really difficult to anticipate to lasting impact businesses experience during times of crisis. No matter the severity of the emergency event, you might see a number of issues arise.
Loss in Productivity
A reduction in employee morale, illness, or other factors may result in several hours worth of lost productivity due to a crisis.
Uncertain Compliance Obligations
Many crises occur without warning, which means rules and regulations must be developed as you experience the aftermath of the crisis. This may make complying with obligations and regulations difficult.
Prospective Clients Postponing Commitments
Internal and external crises often make people feel uncertain, and prospects may decide that it is not the best time to purchase a new product or service.
A crisis may cause a halt in travel plans and result in canceled events. This means your business may miss the chance to make meaningful and lucrative connections with other businesses.
Low Consumer Spending
Crises in your local area due to a natural disaster, recession, or pandemic may cause people to conserve more of their money. This means individuals aren’t likely to be open to spending their money on things they don’t absolutely need, which could pose a sales challenge for you and your team.
Location or Office Closures
Closures may affect the way you conduct business. This could cause you and your employees to adapt to inconvenient or new working conditions.
Furloughs, Layoffs, or Terminations
If you must lose some of your employees, your other employees may feel strained with the extra work they take on for the others who lost their jobs.
6 Business Needs You Can’t Ignore During a Crisis
Even when you are faced with a crisis, you must keep up important business needs to keep your business functioning successfully.
1. Marketing Efforts
Your marketing message or methods by which you choose to market may need to be adapted during a crisis, but your marketing initiatives should remain productive. Some crises provide opportunities for marketing that wouldn’t have been available to you prior.
For example, you may be able to align your new message with customer concerns and desires for specific services, products, and product attributes.
After Target had a wide-spread data breach in 2013, they opted out of marketing materials that encouraged shoppers to apply for a store credit card. The CMO also made sure their marketing efforts were measured around integrity and trust to appeal to the sentiments of its customers.
Research market trends and conduct a competitive analysis to find out how your competitors have responded to similar crises in the past. This may help you to develop a marketing strategy during or after a crisis. You may also decide to conduct testing and send out a few messages to see which ones your customers respond more favorably to.
2. Sales Initiatives
The sales process you have for crises likely needs to be adapted depending on the crisis you are dealing with. If the crisis affects people on a large scale, then you may need to provide your customers with more value and a shorter sales process.
When people have a lot to worry about, they likely only want to learn about the most essential parts of your products and services that will benefit them.
Your sales initiatives should be humanized and appeal to their needs. If your product or service makes your customers’ lives easier or helps them to worry less about their problems, then it may be best to highlight those features when you sell them.
Try not to manipulate their emotions, but simply assure them that what your company has to offer them is valuable for them despite the current crisis.
3. Budget and Revenue Management
Keeping a strategic and sometimes tight budget during a crisis is helpful for long-term success.
At the beginning of each fiscal year, try allocating a portion of your budget to crisis management. Include a list of important vendors and suppliers and priority payments that are required to be made to ensure your operations aren’t disrupted.
In the midst of a crisis, identify areas where you can conserve cash such as reducing or canceling orders that are not essential to your business. Establish initiatives to quickly convert excess working capital into cash, if your business is able to do so.
In some instances, stimulus money might be available in a crisis from your local government. Make sure you research what your business qualifies for and what your employees qualify for to assist them if you need to lay them off.
4. Customer Experience
A crisis might cause troubling times for your business and your employees. However, you must remember to provide the best customer experience possible for your clients.
Offer them genuine support during overwhelming times while staying true to your purpose and company values. Continuing to provide your customers with world-class service during a crisis is a way for your company to remain socially responsible.
One study shows over 60 percent of customers prefer to buy from socially responsible brands. The way your organization shows up for its customers, employees, and the community leaves a lasting impression on your clients’ minds.
For instance, Ford started a new campaign initiative called “Built to Lend a Hand” during the COVID-19 pandemic crisis to offer several payment relief options and credit support to customers.
Making sure your customers are well taken care of during times of crisis results in greater customer loyalty and can boost your brand’s reputation. After all, the loyalty of your customers can make or break your business during a variety of crises.
5. Retaining Talent
Before you can attend to and please your customers during a crisis, you must first care for your employees. Many of your employees are likely to feel exceedingly concerned about their income, their safety, and their families’ safety when a crisis does arise.
Employees need to be reassured that you care about their well-being and that you will take the steps necessary to help them if at all possible. If you are unable to assist them, then provide them with transparency about what is involved with the crisis you are managing.
Allow your employees to work with you to come up with solutions that work, and provide them with a “we’re all in this together” approach.
For example, during the recent COVID-19 global pandemic, the CEO of Marriott shared pertinent information about the company’s outlook and announced that he and his executive team would be taking pay cuts in order to keep paying as many employees as possible.
Displaying your care for your employees will likely result in a reduced rate of turnover and an increase in productivity and collaboration.
6. Database Management
Access to records is perhaps one of the most important things to pay attention to during a crisis.
Depending on the crisis you are dealing with, you and your employees may be separated from physical files and documents. Hard copies of records have the potential to be destroyed or lost.
It is important to make sure your data is being constantly updated and backed up in one place on a secure server so you don’t risk losing contacts and other important information that is essential to your business operations.
Prepare for a cybercrime crisis or another kind of event that results in a data breach by readily changing your security features and by keeping backups of your data in other virtual locations.
No organization wants to face any sort of crisis, but as common sense and data suggest, a business crisis is inevitable.
It is best to remember your core business must-haves and carry them out as best you can during a crisis to position yourself strategically in the marketplace.
If you continue your efforts and initiatives calmly and adapt to the changes a crisis may cause, then your business has the potential to come out better than it was before.