Perhaps last year you did the math, and it made a lot of sense to create your products in China. It was a great decision for many reasons. But, of course, you didn't think a global pandemic would happen months down the line, impacting China's ability to create or ship your products.

The coronavirus has left a lot of businesses that manufacture their products in China in a tough position. I personally know two companies that didn't plan on this event happening and every product on their website is now sold out because they can't manufacture their products. They had no backup manufacturing facility in a different geographic location because they never thought something of this scale would happen.

The more I talk to business owners, the more it's apparent that the "I never thought this would happen" type of thinking is a bigger issue than I previously thought. It's not just short-term thinking, it's dangerous thinking that can bankrupt their business.

Because of globalization, what happens in countries thousands of miles can impact you in ways you never thought possible. We're all connected in one way or another, and this should be a lesson to any founder and not just companies that manufacture physical products.

Here are two lessons you can learn from this.

1. Creating a backup plan is a great business strategy.

No one could have predicted this virus to have occurred and to create havoc like it is now. But, it happened, and now companies without backup plans are seeing the impact. 

It's a common practice to create a Plan B strategy, but you'll still find many organizations that don't do it, which is a huge mistake. A backup plan shouldn't be viewed as a "just in case" plan. It should be viewed as a competitive business strategy. 

By actively creating multiple backup plans, it will force your company to make sure that your current plan is actually the right choice in the first place. For example, if you manufacture products, researching different vendors, different website hosting partners and various geographic locations to manufacture your products, will force you to always be aware of what your options are.

You're staying in the loop on how much things cost, or different ways to do something your current business is doing. Companies who didn't do this, are now scrambling to find manufacturer alternatives that aren't based in China.

Those who did prepare for this now have a competitive advantage.

2. Execute your backup plans every six months.

In the information technology world, many have a "data backup" plan and a "business continuity" plan which basically ensures that you're still doing business as normal if something catastrophic happens. So, if a tornado wipes out their data center, it ensures that the business not only has a backup ready to go but the backup data center that can still serve email immediately as if nothing happened.

But, here is where it gets interesting. The best organizations don't just have plans in place, but will also execute the plans as if something catastrophic happened, to see if they are actually ready to handle the event. 

For example, a company will host their production data on its data centers in California, with the backup located in Florida. Then every six months, they will make Florida the production environment, and use California as a backup.

By executing the plan, they get to work out all the kinks and issues that might happen during the transition and be better prepared during a real disaster. Business owners should do the same. They shouldn't just have their backup plan stored as a document that no one looks at, but they should actively practice it. 

I sincerely hope that the coronavirus situation gets solved too, so everyone can go back to business as usual. But, this should be a wakeup call for all entrepreneurs and business owners to start creating and executing their backup plans, before something big happens. It's a great strategy, and you'll be thankful that the entire company is ready to make the switch to Plan B on a moment's notice.

Published on: Mar 4, 2020
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.