Business continuity plan and how to create one

By developing a clear picture of how different types of problems and stages of crisis can affect your business — whether it be a recession or a natural disaster — and putting a realistic Plan B in place for each of them, you’ll keep your confidence up and business operating through anything you’re faced with.

Read on for everything you should know about a business recovery plan, plus an easy-to-follow template to help you get started.

What is a business continuity plan?

A business continuity plan is a document that lists essential business information needed to maintain operations and financial viability through an unforeseen or unexpected event. In other words, it’s your professional lifeline.

A BCP typically includes emergency response communication details, critical business activities, and the procedures and resources required to sustain basic functioning through a disruption.

Why is a business continuity plan important?

A BCP is one of the most critical components of risk management. Think of it as the central hub for your operation’s vital information during an emergency, outlining all business processes needed for your company to function as well as the logistics required to avoid, or at least manage, the risk of failure through the crises or unplanned event.

Remember: When disaster strikes, you don’t know how your team will react — and even the best members of your team may struggle to keep the lights on. With a BCP with clear instructions and well-documented information, everyone in your organization will have an easier time staying on the same page.

Here are a few instances where a BCP could help:

• Recession
• Cyber attack
• Flood, fire, or other natural disasters
• IT outage or malfunction
• Widespread power outage
• Human error

How to create a business continuity plan

Not sure how to get started with your BCP? Our business continuity plan template can help. It includes:

• Emergency contact information: A list of your key contacts, both internal (employees, IT, payroll, office manager) and external (key customers, vendors, suppliers, accountant, banking representatives).
• Business impact analysis: Helps you determine and evaluate the consequences of interruptions to your business and its activities.
• Recovery: This includes the measures you’re already taking to prevent, control, or manage risk, plus alternative procedures and resources your business could take should it need it.
• Training: Make sure your employees are aware of your BCP as well as the steps they would need to take in the event of an emergency.

Perform a business impact analysis (BIA)

Completing a quick business impact analysis lets you prioritize the key processes in your business and then estimate the potential impact of them not occurring. There are four elements that go into a BIA — here’s a quick step-by-step breakdown:

• Identify critical business processes needed for your business to function. For example, sales operations, inventory, payrolling processing, or a store closure.
• Run through scenarios using various lengths of disruption. Does the impact on your business change over 14 days, 30 days, 45 days, 60 days, or more?
• Estimate the impact on your daily operations, from lost sales revenue and decreased cash flow to increased expenses or employee health and safety concerns.
• Review customer and financial impacts, which will give you a better understanding of what the long-term effects may be.

Create an ongoing emergency response communication strategy

With a BCP, you want to make sure you’re armed with the necessary information to help keep your team members safe. So first, make sure your emergency contact list is up to date. Include all your key contacts, such as employees, technical support, suppliers, emergency assistance, and your banking relationship manager. Then, establish a communication plan for updates and identify who’s responsible for keeping communications going.

Identify critical business activity

Every business has must-haves and nice-to-haves. The must-haves are the necessary processes and resources you need to run your business. This part of the exercise helps you identify them and then rank them in order of importance. Here’s what it may include:

• People
• Processes
• Operations
• Equipment
• Buildings

Example: Let’s take the example of a physical store closure. If your store closes, then it has a crucial impact on your ability to sell products and services.

Determine your maximum acceptable length of time activities can be disrupted

Getting back to normal may take several weeks or more, so you’ll want to look at how the length of downtime impacts your business. For each critical business activity you identified above, estimate its impact on your business over different lengths of time. That’ll help you figure out the maximum acceptable period an activity can be “offline” before critical failure. For example:

• 14 days
• 30 days
• 45 days
• 60+ days

Example: Continuing the example from above, a store closure lasting 14 days will have a much different impact on your business than a closure for 60+ days.

Consider potential impacts from the activity being disrupted

For each critical business activity, think about the specific effects a disruption might have on your business. For example:

• Loss of critical staff or store/office locations
• Lost revenue sales and income
• Decreased cash flow
• Increased expenses (e.g., overtime pay, outsourcing, drop-shipping, etc.)

Example: If your store is closed, you’ll take a hit to sales revenue. Also, you might start selling more from your website, which incurs shipping costs and might raise expenses.

Think about the impacts in terms of your customers and your finances

The downtime from your critical business activities might impact customers, finances, and your ability to meet regulatory requirements (if applicable). Estimate as many of these impacts as you can. For example:

• Customer: Delayed orders or longer shipping times can cause higher phone volume from upset customers.
• Financial: How much would disruption cost in terms of a loss in sales revenue or increased expenses?

Example: If your store is closed, you might not be able to deliver the products or services your customers ordered, causing customer dissatisfaction. The loss in sales revenue would be $X.

Recovery strategies

Another essential component of a BCP is your designated recovery strategies. These are the alternative measures you and your business could take to recover and restore operations during an unexpected event.

With recovery strategies, you should:

• List out the current processes you already have in place to prevent or minimize the impact of the disruption.
• Brainstorm alternative processes or resources you could put in place quickly to restart or maintain operations.
• Identify someone to implement each recovery strategy.

Disaster recovery plan vs. business continuity plan

While a business continuity plan is focused on maintaining operations and financial viability, a disaster recovery plan is specific to IT infrastructure, such as restoring technological systems and data access.

More resources to help you plan

Check out these additional resources to help you plan for the unexpected:

• FFIEC Business continuity management (BCM) Handbook
• The Small Business Administration’s Guide: Prepare for Emergencies
• Department of Homeland Security’s Ready Website