A business can be struck by earthquakes, vandalism, floods, tornadoes or fire at anytime. Unfortunately, most small businesses around the country are not prepared to recover from such disasters. According to the U.S. Department of Labor Statistics, more than 40 percent of all companies that experience a disaster never reopen and more than 25 percent of the remaining companies close within two years.
Businesses that do reopen are often crippled by staff turnover, increased debt or an economic downturn. As big businesses have the resources to support backup computers, extra offices and elaborate disaster recovery plans, they tend to be the survivors when disaster strikes.
Yet small businesses are the key to economic recovery after disasters. They create two-thirds of new private sector jobs in America, employ more than half of all workers and account for more than half of the output of our economy.
Small businesses stimulate employment and diversification of the economy. Small firms produce the items that line the shelves in stores and keep intact the heritage of ingenuity and enterprise.
Disaster preparedness for small businesses
- Back up vital information. Losing vital information such as accounts payable, accounts receivable or inventory management can be a devastating blow. The easiest and safest way to prepare for catastrophe is to back up the data stored on computer systems.
Record backups include ownership documents, account numbers, banking and financial information, insurance policies, product lists, employee databases, customer databases, supplier databases and personnel files. Back up copies should be stored off premises.
- Safeguard equipment. Store equipment off site or elevate it above flood level, move it away from windows and doors, and protect it with covering. Protecting your equipment will save time and aggravation in the event of a disaster.
- Know disaster resources. For example, the IRS allows business owners to amend their previous year’s taxes to claim disaster-related casualty losses if the president declares a disaster. The Small Business Administration may be able to provide low-interest loans, and your state or local Economic Development Agency may be able to help. Identify these organizations ahead of time.
- Review your insurance. Premiums and deductibles increase for businesses in the wake of natural disasters, so you’ll need to review your property/casualty insurance carefully with your insurance agent or financial adviser, and review it annually thereafter.
The Small Business Administration suggests that business owners have three types of coverage: Property insurance to protect against losses from fire and theft, liability insurance to protect against lawsuits and business-interruption insurance to cover revenue loss. A prepackaged policy generally includes all three, and is more affordable than purchasing coverage separately.
- Develop a specific disaster plan. Map out precisely who will do what if disaster occurs. Who will be in charge of evacuation or of making certain that important documents and data are safely secured? Designate a meeting spot outside of your business. Share the plan with your employees and keep it up to date.
- Keep a business savings. The key to a successful disaster recovery is money. You won’t be able to wait weeks or months for insurance adjusters and settlement checks, so prepare by saving.
- Keep strong communication. An important part of disaster recovery is to make sure that the correct information is communicated to employees, customers, media and the general public. Someone must be assigned the responsibility for deciding when it is appropriate to make public statements and for creating appropriate answers to the questions that will be asked by each of these groups.
Disaster can strike any time. It does not have to be a catastrophic event such as Hurricanes Katrina or Rita — it can be as simple as a broken waterline that destroys your company records, a fire, the loss of a key employee or any other significant disruption to your company’s operations. The key to recovery is planning. Communicate the plan to your employees so they know what is expected of them during a time of crisis. Most of all, be prepared.
