If you have a small business, then sooner or later you're going to have to put out ‘fires'. That's why learning how to manage a crisis is so important! Crisis management is involves determining the area and extent of the crisis, planning out ways to respond to the crisis and executing a plan in order to resolve it.

Basically, crisis management can be divided into 3 subsections: crisis bargaining and negotiating, crisis dynamics and crisis decision-making.

Types of Crises in Business

Generally crises can be categorized into three different types in business. They are as follows:

  • Financial crisis: Involves complications related to short term cash flow and bankruptcy issues on a long-term basis.
  • Public relations crisis: This often crops up due to negative publicity. It affects the success of your company in an adverse manner.
  • Strategic crisis: Involves various changes in the business environment, which may bring the survival of your company into question. For instance, introducing the automobile turned out to be a strategic crisis for buggy-whip manufacturers.

In order to prevent a crisis from occurring, it is important to take some preventive measures. Many small businesses plan ahead of time and project probable results. You should avoid making ant decisions that may turn into a crisis. Small business owners should be aware of situations that can affect them the most and should make a contingency plan for them. However, if prevention does not lead to success, then apply the following steps as soon as possible.

Preventive Measures

  • Always conduct an objective assessment of the causes that led to the crisis
  • Analyze whether the causes have a long-term or short-term effect
  • Think of the most probable course of events
  • Search for those opportunities
  • Act immediately
  • Keep your attention on putting the most efficient people on activities that can help resolve the crisis

Crisis management isn't just for the big boys — it is even more important for small businesses since they are more prone to be adversely affected by even small crises.