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A continuity plan measures the business's runway, prices a closure and what an arrangement that shortens it is worth, arranges cash where the runway is too short, and lists the contacts and backups — written, shared and tested.
Paper packet. Every task here also exists on screen, where it is checked automatically; answers written on paper are not assessed by Nydus. When you are back at a device, enter your answers there.
You will work out a business's runway, price closures of different lengths, work what an arrangement saves, judge whether cash outlasts a closure, find the cash to arrange, fill in a food truck's sheet, and value a standby agreement.
Risks are mapped, insured where it makes sense, records backed up and protected, tools chosen with an exit. A continuity plan pulls these together into one question: if something stops the business, how does it keep going, or restart, before the cash runs out? The arithmetic is the same as before: costs a month, contribution a day, a chance and what an arrangement removes.
| Term | What it means |
|---|---|
| Continuity plan | A short written plan for keeping the critical activities going, or restarting them, after a disruption. |
| Critical activities | The activities the business cannot do without for long. |
| Runway | How long the cash would cover the fixed costs with nothing coming in. |
| Arrangement | A prepared fallback: a person, a spare, an agreement, a second supplier. |
| Standby agreement | An agreement made in advance to borrow or rent what the business would need in a disruption. |
If Neighborhood Kitchen closed, rent, loan repayments, insurance and core wages would still cost 4,000 dollars a month. It has 6,000 in cash. Its runway is 6,000 ÷ 4,000 = 1.5 months. Insurance may help later, but claims take time to pay; the runway is what the business lives on meanwhile.
$$\text{runway} = \frac{\text{cash}}{\text{fixed costs a month}}$$
Closures cost more than repairs. Each day Maya's kiln is down loses 500 dollars of contribution. A breakdown with a 600-dollar repair costs 3 × 500 + 600 = 2,100 if it stops her for 3 days, and 14 × 500 + 600 = 7,600 if for two weeks. Almost all of that is the days, so an arrangement that shortens the stop — an agreement to rent a neighbor's kiln — is worth far more than a cheaper repair.
Another way: table
A kiln breakdown at Maya's Ceramics.
| Days stopped | Cost |
|---|---|
| 3 | 2,100 |
| 7 | 4,100 |
| 14 | 7,600 |
Another way: steps
List the critical activities. For most small businesses they are few: making or delivering the product or service, taking orders and payments, paying staff and suppliers. For each, ask what could stop it: the owner, a key person, the premises, a machine, a supplier, the computer.
Work the runway. Add the costs that keep coming while the business is stopped — rent, loan payments, insurance, the wages of staff who will be kept on — and divide the cash by that monthly figure.
Price each closure. Days stopped times the contribution lost a day, plus any repair or replacement. The days usually dominate.
Price each arrangement. An arrangement is worth the closure cost it removes: the cost of the long stop less the cost of the short one, including any fee. Over a year, multiply by the chance of the event.
Check each figure by sense. A runway shorter than a likely closure means cash must be arranged in advance; an arrangement that saves less than it costs is not worth keeping on the plan.
Each likely disruption gets a prepared arrangement, made while there is no crisis and everyone is willing:
An arrangement written only in the owner's head fails in exactly the situation the plan is for, when the owner is the one who is missing.
If the runway is shorter than a likely closure, the plan must close the gap before it is needed. The options are to build cash savings over time, to arrange a line of credit that can be drawn on quickly, to shorten the likely closure with a better arrangement, or to carry business-interruption insurance that pays for lost income and continuing costs. Insurance pays later, so it works best alongside a runway long enough to reach the payout.
Lenders are slowest to help a business that is already closed, so a line of credit is arranged in good times and left unused.
Keep the plan short enough to use in a crisis — two or three pages:
Share the plan with whoever would need it, keep a copy away from the premises, and test it: a practice run of the worst case — the owner off for a week — shows the gaps while they are cheap to fix. Review it each year, or when the business changes: a new site, a new key employee, a new machine, a new supplier.
In most small businesses the owner is the single largest continuity risk. The owner holds the passwords, knows the suppliers, prices the jobs, pays the bills and often does the most skilled work. An illness, an injury or a family emergency can stop all of it at once, and it is the disruption owners least like to plan for.
The plan for it has three parts. First, a person: someone who could run the critical activities for a few weeks, trained in advance and trusted with the access they would need. In a very small business that may be a part-time helper, a partner, a family member or a friendly business in the same trade. Second, the knowledge: the standards, price lists, supplier contacts and routines written down where that person can find them. Third, the access: a second login to the bank and the accounting software with the right limits, and a named person the bank knows can act, arranged with the bank in advance.
A practical test is a week away. An owner who takes a real week off, without checking messages, will learn exactly which parts of the plan are missing: the password nobody else knows, the supplier who only deals with the owner, the price nobody else can work out. Each gap found on a planned week off costs a phone call; the same gap found during an emergency can cost the business.
The same thinking applies to any key employee. If one person is the only one who knows how to do something important, the plan writes it down and trains a second person, even if only in outline.
A disruption is also a test of the business's relationships. Customers who are told quickly and honestly what has happened, when the business expects to reopen and what it can still do for them usually wait; customers who hear nothing go elsewhere, and some do not come back. The plan should say who tells customers, how — a message to the customer list, a sign, a post on the business's page — and what the message says.
Suppliers and the landlord matter too. A supplier told early can pause deliveries instead of sending stock that will spoil. A landlord told early may agree to defer rent. Staff need to know whether they will be paid and when to expect to return. All of this is easier with the contacts in the plan and a short template message already written.
A seafood restaurant on the Gulf Coast of Mississippi had written a one-page continuity plan after a smaller storm years before. Its fixed costs while closed — the mortgage, insurance, utilities and the wages of its two managers — came to about 18,000 dollars a month. It kept about 30,000 in cash and a 40,000-dollar line of credit arranged and unused: a runway of about four months including the credit.
When a hurricane flooded the dining room, the restaurant was closed for eleven weeks. Its plan had three arrangements. Its menus, recipes, supplier list and staff contacts were backed up online, so the managers could work from home the next morning. A standby agreement with a catering kitchen inland let it run a reduced takeout menu from week three, bringing in about 6,000 dollars of contribution a week. And its business-interruption insurance, which the owners had reviewed the year before, eventually paid most of the lost income, four months after the storm.
The takeout menu cut the cash drawn from the runway by about half. The restaurant used 20,000 of its credit line and reopened with its staff and suppliers intact, while two neighbors without plans or cash did not reopen at all.
In the United States, the Small Business Administration offers low-interest disaster loans to businesses in declared disaster areas. They take weeks to arrive, so they help a business that already has a runway to reach them.
Insurance is the continuity plan. Claims pay later; the business must survive meanwhile.
Fixed costs stop when the business does. They keep coming.
The plan lives in the owner's head. Write it and share it.
A written plan is finished. Test it and review it.
A cheaper repair is the best response. The days lost usually cost more; shorten the stop first.
Planning for disasters is only for big firms. Small businesses have the shortest runways and the fewest people to fall back on, so a two-page plan matters more to them, not less. Most of it costs nothing but an afternoon: a list of contacts, a written routine, an agreement with a neighbor, a backup checked once.
Customers will wait. Some will, if they are told what happened and when to expect the business back; silence sends them elsewhere.
Only fire and flood need a plan. Illness, a lost laptop and a failed supplier are far more likely, and each needs its arrangement too.
Work the runway.
$2500 \div 1000 = 2.5$
Months of fixed costs.
Price a missed market day.
$1 \times 400 = 400$
A Saturday's contribution.
Name the likeliest disruption.
$\text{Monica ill on market day}$
She runs the stall alone.
Prepare the arrangement.
$\text{a helper trained to the written setup}$
The stall opens without her.
Test the arrangement.
$\text{the helper runs one Saturday}$
Before it is needed.
Price the fourteen-day stop.
$14 \times 500 + 600 = 7600$
Without an arrangement.
Price the three-day stop.
$3 \times 500 + 600 + 150 = 2250$
Renting a neighbor's kiln at 150.
Find the saving on a breakdown.
$7600 - 2250 = 5350$
Mostly the days.
Multiply by the chance.
$0.3 \times 5350 = 1605$
Three in 10 a year.
Take off a standby fee.
$1605 - 100 = 1505$
The agreement's yearly worth.
Write it into the plan.
$\text{the neighbor's number and the terms}$
Agreed in advance.
Work the runway.
$7500 \div 2500 = 3$
Months.
Price a two-week closure.
$12 \times 250 = 3000$
Twelve working days' contribution.
Arrange cover for urgent repairs.
$\text{a workshop across town}$
A standby agreement.
Set up the backup.
$\text{the job log backs up nightly}$
Restorable anywhere.
Approve a second supplier.
$\text{an account open, prices agreed}$
Ready if the first fails.
Test the plan.
$\text{the owner takes a week off}$
The worst case, practiced.
Fix the gap it found.
$\text{a parts account for the mechanic}$
He couldn't order without her password.
Find a week's fixed costs.
$2000 \div 4 = 500$
Two thousand a month.
Find the runway in weeks.
$1500 \div 500 = 3$
Fifteen hundred in cash.
Find the cash to arrange for a five-week flood.
If Neighborhood Kitchen had to close, rent, loan repayments, insurance and core wages would still cost $4200$ dollars a month. It has $23100$ dollars of cash. For how many months could it pay those costs while closed?
Answer:
Complete the worked solution: Each day Maya's kiln is down loses $800$ dollars of contribution, and a breakdown costs $700$ dollars to repair and stops her for 14 days. An agreement to rent a neighbor's kiln would cut the stop to 3 days, for a rental of $200$ dollars. Find what the agreement saves on a breakdown.
Price the fourteen-day stop.
$14 \times 800 + 700 =$ l
Without the agreement.
Price the three-day stop with the rental.
$3 \times 800 + 700 + 200 =$ s
With the agreement.
Subtract the second from the first.
$(\text{long}) - (\text{short}) =$ g
What the agreement saves.
Set it beside a cheaper repair.
$\text{the days, not the repair, drive the cost}$
Shorten the stop first.
Write it into the plan.
$\text{the neighbor's number and terms}$
Ready before it is needed.
Each day Maya's studio cannot fire its kiln loses $500$ dollars of contribution. A breakdown would also cost $600$ dollars in repairs. Fill in the cost of a breakdown that stops the kiln for 3, 7 and 14 days.
| Cost, dollars | |
|---|---|
| 3 days | |
| 7 days | |
| 14 days |
Bright Home Cleaning's fixed costs are $3600$ dollars a month, and it has $2700$ dollars of cash. A flood at its base would stop work for about $4$ weeks, taking four weeks as a month. Could it pay its fixed costs through the closure?
Bright Home Cleaning's fixed costs are $3300$ dollars a month, taking four weeks as a month, and it has $2475$ dollars of cash. A flood at its base could stop work for $5$ weeks. Complete the sentence.
The closure's fixed costs come to c dollars, so the plan should arrange a dollars in advance.
A food truck in Denver has fixed costs of $1100$ dollars a month — the commissary kitchen, permits, insurance and a loan — taking four weeks as a month, and $825$ dollars of cash. Each day off the road loses $700$ dollars of contribution. An engine failure would cost $500$ to repair and take the truck off the road for 14 days; renting a truck would cut that to 3 days for $500$ dollars. Fill in the working sheet.
| Amount | |
|---|---|
| Runway, weeks | |
| Cost of a fourteen-day stop | |
| Cost of a three-day stop with a rental | |
| What the rental saves |
Lesson test: one question per skill, one attempt each, no hints. Your answers are checked when you submit.
Maya reckons there is a $1$ in 10 chance her kiln breaks down in a year. A breakdown stops her for 14 days, and each day loses $400$ dollars of contribution. A standby agreement with a neighbor, costing $50$ dollars a year, would cut the stop to 3 days. What is the agreement worth a year, on average, in dollars?
Answer:
You can plan how a business keeps going when something stops it. Tell someone why insurance is not a continuity plan. Next: writing a business plan and pitch.
17. Your turn: Bright Home Cleaning, step 3
$5 \times 500 - 1500 = 1000$
A line of credit, arranged now.