What is your Plan B?

As the baseball season began, my beloved NY Mets got off to a fast start.  They found a way to win the first 4 games in part because their star 3^rd baseman, David Wright was hot, hitting for a .583 batting average and an on base percentage of .647.  Suddenly, disaster struck!  Diving back to first base, David broke the pinky on his right hand and is out indefinitely.  The Mets replaced him at 3^rd base with a lesser player and promptly lost the next game.

The Mets troubles are not unlike those of most businesses.  If a key player in any business is unable to perform, the business must find a way to continue and hopefully flourish.  In business, the key player could be anyone including suppliers, customers, skilled workers, your computer systems, even you.  The loss of any of these players, even temporarily, can have a devastating effect on your business.

A very important part of business management is finding ways to mitigate the risk to the company brought on by the loss of a key player.  The more contingency planning you do today, the smaller the crisis when the inevitable happens.  Securing your business does not have to be an expensive undertaking, (although at times the risks involve may justify large expenditures), but is instead all about assessing the severity of the risks and your tolerance for the losses that can accompany them.  Here are some examples:

• Let’s imagine a situation where a key supplier of a component part loses her factory in a fire.  She calls you to deliver the bad news that your last order had not yet shipped and that she expected to be unable to start shipping again for 8 to 12 months.  What will you do?  Do you have alternate (secondary, tertiary) suppliers who can pick up the slack?  How long can you continue to operate?  What will it cost you? Higher costs? Lost revenue? Angry customers?

• Imagine a situation where your business partner dies suddenly of a heart attack.  What will it cost to replace him in the business?  Do you have a buy/sell agreement in place?  Do you really want to be in business with his spouse?

• Imagine if a tornado destroyed your offices.  How long will it take to get back up and running?  Do you have your computer systems backed up and your data stored off site?  How current is your backup?  Will your customers be impacted? 

I am sure that you can think of many more examples that apply to your business. Developing a plan will position you to deal quickly with these issues and keep you in the game. 

Moral Dilemma

There is a growing wealth of information about businesses who promote sustainability and ethical practices.  I think that it is probably safe to agree that if everything else is equal and company A operates on a higher ethical standard than company B, most of us would buy company A’s product instead of the comparable one from company B.  We would prefer a product manufactured with greater emphasis on sustainability in the areas of Energy & Climate; Material Efficiency; Nature & Resources; and People and Community. 

The moral dilemma arises when the products are not equal.  If for example, company A’s product is 10% more expensive than company B’s, we are faced with utility function.  Do we as consumers value our sustainability enough to spend more on products from manufacturers that promote such practices? 

I think there is some circumstantial evidence that some people are willing to incur the additional expense.  One example that I frequently cite is the Toyota Prius.  Clearly the most successful of the hybrids, the Prius offers its owners gas mileage in excess of 45mpg.  By most accounts, in spite of this high mileage, owners will never recoup the additional cost of the vehicle (over a similar size car equipped with a standard engine) even with gas prices over $4 per gallon.

To complicate the buying decision, the Prius has some end of life issues that call into question its overall ecological benefits.  Prius’ electric motor is operated off of a large lead acid, and metal hydride battery which is not particularly earth friendly.

Ultimately, if you want to ‘do the right thing’ you must carefully and extensively research your options.