A business continuity plan helps your business navigate unforeseen circumstances, whether it’s a natural disaster, a financial emergency, or other type of loss. Creating a plan in advance gives you a head start on how to keep your business up and running, instead of having to scramble in the wake of a major challenge.
Here’s what you need to know about business continuity planning, plus how to create a strategy for your company that prepares you for future surprises.
Key Points
• Business continuity plans help companies prepare for unexpected disruptions like natural disasters, data breaches, and staff shortages.
• Disruptions impact half of all businesses, with 25% closing permanently afterward, making advance planning critical for organizational survival.
• Essential plan components include emergency response procedures, public relations communications, resource management inventories, employee contact information, and access to financial accounts.
• Creating an effective plan requires seven steps: business impact analysis, risk assessment, recovery identification, communications strategy, data backups, staff role definition, and testing.
• Business continuity plans should be tested annually through simulations and updated whenever vendors, key personnel, or facilities change to ensure readiness.
Why Business Continuity Planning Is Important
Most business owners know how to write a business plan that outlines the strategy of launching and managing your company.
As your organization becomes more seasoned, you probably create and update a three-year or five-year business plan on a regular basis to stay on top of industry and economic trends.
But what about preparing your company for external factors beyond growth goals?
Planning for business continuity can benefit your company in several ways. For starters, preparing in advance for unforeseen circumstances gives your business a better chance of survival.
Disruptions are difficult to avoid and impact half of all businesses, whether from natural or manmade causes. And after experiencing a disruption, 25% of businesses close their doors permanently.
Finally, not only does a business continuity plan reduce your overall risk, it may also be required when applying for a small business loan, business line of credit, or business insurance. Creating a strategy in advance can help you get ready to apply before you need a loan or insurance coverage.
Recommended: Prepare Your Business for a Recession
How a Business Continuity Plan Works
What is a business continuity plan? It’s a document that outlines how your company will respond in the event business is interrupted. Business continuity planning usually involves two sets of processes: preventing risk and mitigating damage that actually does occur.
Your team knows exactly how to respond when a disruption occurs, whether it’s navigating a data breach or remaining open even if a power outage occurs. The plan has assigned roles and responsibilities for different staff or departments, allowing everyone to respond quickly and efficiently.
Key Components of a Business Continuity Plan
Every business continuity plan should include the following information:
• Emergency response: Immediate steps that must be taken to avoid additional damage
• Public relations: Communications to customers or other affected parties
• Resource management: An inventory of all the tools needed to execute the plan, as well as access to financial accounts, including your business checking and small business credit cards
• Employee communications: Contact information to communicate updates to employees
Steps to Create a Business Continuity Plan
Start your business continuity plan by taking the seven following steps.
• Perform a business impact analysis: This process helps you understand the critical business procedures that need to be addressed, plus the resources your business relies on to function.
• Assess company risks: Common potential risks include natural disasters, data breaches, and employment issues (such as a strike or losing key personnel).
• Identify how recovery looks: Define what recovery looks like and the maximum downtime it should take to achieve that objective.
• Craft a communications strategy: Include a process for both employee notification and public relations.
• Create backups: Have a plan to backup data, including physical locations as well as cloud servers.
• Define staff roles: Identify which staff members are responsible for executing each portion of the business continuity plan.
• Test and update your plan: Run drills annually so everyone can practice their roles and adjust the plan as needed.
Recommended: Business Loan Calculator
Business Continuity Plan vs. Disaster Recovery Plan
Both a business continuity plan and a disaster recovery plan can help your business during challenging times. But they’re two separate documents that plan for different scenarios.
• Business continuity plan: Defines how to get your business back to regular levels of functioning during a disruption.
• Disaster recovery plan: Focuses primarily on protecting data and IT systems during a disruption.
Recommended: Businesses that are Recession-Proof
Examples of Business Continuity Scenarios
There are a number of disruptions that can negatively impact your business, including environmental and humanmade causes. Here are some common scenarios that would benefit from a business continuity plan.
• Natural disasters
• Data breaches, cyber attack, or system failures
• Power outages
• Health emergencies
• Unexpected staff shortgages
Testing and Maintaining a Business Continuity Plan
Creating a business continuity plan isn’t a set-it-and-forget-it exercise. It’s highly recommended to test, exercise, and improve your plan at least once a year and then update it based on new needs or changes that have occurred. In addition to an annual test, you may also want to review the plan anytime your business has changes in vendors, key personnel, or facilities.
So how do you actually test your plan? Create simulations or drills that walk your employees through different scenarios. This lets them practice their roles in a potential emergency, such as having the IT team back up data or having the PR team draft a press release.
Common Mistakes to Avoid in Business Continuity Planning
Whether you’re a startup business or a seasoned company, you can make the most of your business continuity plan by avoiding these three crucial mistakes.
• Not prioritizing recovery efforts: It takes time to fully recover from a major business disruption. Your plan should prioritize specific actions to resume the most critical portions of your business.
• Not testing and updating your plan: Things change constantly in business, from your latest vendors to your employees’ contact information. All components of your business continuity plan should be tested and updated regularly so you’re truly prepared for a real-life disaster.
• Not knowing how to access your business continuity plan: Not only should your plan be up to date, it should also be accessible from any location, whether a natural disaster is preventing key employees from accessing your office or a cyber attack has disrupted your network access.
Who Is Responsible for Business Continuity Planning?
Ultimately, the responsibility for a business continuity plan falls with the company’s executive leadership. That may look different depending on the size of your organization. For a small business, it could be the owner. For larger companies, you may have an entire business continuity team that oversees the process.
Within your plan, you’ll also likely assign roles and responsibilities for specific steps. For instance, the IT department would oversee data backup procedures, while HR may be responsible for maintaining employee contact information.
Recommended: Equipment Financing
The Takeaway
Investing the time and resources in a business continuity plan can remove a lot of stress in the future when a disruption occurs. It takes some extra work, but you’ll feel confident knowing your business can weather any storm with the right processes and backups in place.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
FAQ
What is included in a business continuity plan?
A business continuity plan includes components such as a risk assessment, recovery process, employee roles and responsibilities, and a communications strategy.
How often should a business continuity plan be updated?
A business continuity plan should be updated at least once a year. But it should also be tested and reviewed any time your business experiences any major changes, such as new vendors, employees, or technology.
What’s the difference between a business continuity plan and risk management?
A business continuity plan is a specific type of risk management strategy. Risk management can involve broader assessments for operational, financial, and even legal threats. Business continuity focuses on how to get your business operating after a disruption occurs.
Who should be involved in creating a business continuity plan?
Business continuity planning should be the responsibility of executive leadership. But internal stakeholders involved in the plan’s execution should also be involved. This likely includes human resources, IT, legal, and communications.
What are examples of business continuity risks?
Power outage, data breach, cyber blackmail, supply chain disruption, epidemic, or a natural disaster such as a hurricane or earthquake.
Photo credit: iStock/adamkaz
SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SOSMB-Q425-032