Prepare for Business Disruptions Everyday

In a recent Outspokin’ article Bob Margevicius discusses potential supply chain issues the Coronavirus may cause. The information is critical to review as you make your inventory decisions and forecast your needs for the coming few months.

The Coronavirus would also be a great impetus to begin looking deep at ways to ensure that you are always prepared for disruption. Bicycle retailers weigh whether to buy deeper to cover themselves should shortages materialize. Other retailers may be in a far more exposed position as credit lines for many are maxed as we are just getting to the beginnings of the spring selling season. Additionally, inventories for many are at peak, and the cash flow to act should they want to does not exist.

While the Coronavirus may feel like a significant potential disruption, you are always a cold and wet spring, hurricane, flooding, or road construction disruption away from having your business majorly impacted. Let’s look at a few ways you can ensure you are prepared for any interruption encountered as best as possible.

Emergency fund

While it is a simple financial concept, a large percentage of retailers do not have one. Simply opening a savings account that you contribute regularly and have a minimum balance target that you maintain or grow. An emergency fund is just that; you do not touch it until your business is having a financial crisis.

Bank relationship

You should find a local bank and banker that you can work with and trust. You should have a line of credit, and similar to your emergency fund, I like to see people use their LOC as sparingly as possible. Using a LOC for typical seasonal cash flow peaks and troughs is not a great idea, and points to the need to do better forecasting and budgeting. If you are using your LOC coming out of this winter, it doesn’t do you much good if you have already tapped it and decide to act on an increased inventory buy due to the Coronavirus disruption.

Diversified vendor choices

During a significant disruption like the Coronavirus, it pays to have vendors lined up before you need them. There is a lot of inventory out there, and while your preferred supplier may be out of a critical item or category you need, your second or third choice may be able to supply your needs. Sometimes a vendor does not need something as foreboding as the Coronavirus to come up short on inventory. Missed forecasts, containers are falling off ships (apparently it happens), etc. It can all lead to issues. Having a couple of additional sources in your back pocket is a good idea. I also like the idea of continually vendor shopping to compare margins and terms and compare products.

It’s not just a supply-side disruption, as previously pointed out, that can cause financial issues for you. The biggest threat the Coronavirus poses to retailers would seem to be if we would experience a similar lockdown on society as it is happening elsewhere to prevent the spread of the virus. You won’t be worrying about inventory supply at that point, and that is precisely why business disruption planning should be a topic you regularly address regardless of how this particular potential issue plays out. Good luck this spring!

Words by David DeKeyser

David DeKeyser and his wife Rebecca Cleveland owned and operated The Bike Hub in De Pere, Wisconsin, for nearly 18 years. In 2018, they sold the business and real estate to another retailer based in a nearby community. David now writes the Positive Spin series on Bicycle Retailer and Industry News and he writes articles for the NBDA’s blog, Outspokin’. David also provides business consulting through the NBDA’s P2 Consult Program.

 

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