Knowing what is essential

A severe disruption could result during and after a storm. A business would want to hunker down and look at ways to survive the likely short-term struggle. To do so would require some understanding of what core parts of your business need protecting and those that do not.

This is what ‘minimally required resources to function’ is about.

Break-even

The concept of break-even is defined when the business expense is the same as the revenue. If you add them together, you make no loss nor any gain.

During a disruption, if a business wants to remain in the same financial position, it needs to keep itself at or above the break-even point. When a severe disruption occurs, profitability in the short term should be considered secondary. And the focus should be on weathering the storm.

Resource type

There are multiple actions a business could take to function with minimal resources. Resources can be categorized into 4 types.

1. Human resources (not to be confused with the HR department) is the business retaining the skills and abilities of their employees.
2. Physical resources are material assets that the business owns, usually including equipment, buildings and office furniture.
3. Financial resources are liquid assets such as cash, bank investments and stocks or bonds.
4. Intellectual resources are intangible assets, such as brand, patents, copyright and IP.

Each resource is an asset to your business but retains some cost to either maintain or obtain. Therefore, knowing which of these resources are essential to keeping your business at or above the break-even point can make the difference during a time of disruption.

Business policies

If looking at employees as human resources, there may be situations where downsizing or expanding are required and for that, employee’s must be consulted. This is because changes made by the business at times will change the employment conditions of their contracts.

Special considerations should be taken here as employment laws are very tricky. Instead business policy should be set up, so it doesn’t compromise employees’ rights. It guides the consultation process when contracts need to be renegotiated. Make sure there is reference to ‘current policies’ in each employment contract

Alternatives

However, a forecasted disruption could be deemed short term. It may be worthwhile to take out a loan to recuperate losses when business revenue goes below the break-even point, as going below the break-even would mean you’re incurring losses.