Can your small business recover from a disaster?

About one in four businesses never re-open after a major disaster – Insurance Institute for Business and Home Safety.

Disasters come in many forms: floods, fires, tornadoes, loss of key employees, computer hacking, and more. If one happened tomorrow – and it could – are you ready?

“Business owners who are prepared are never going to eliminate all the risks from a disaster, but they’re going to mitigate a lot of them,” says Paul Abert, Executive Vice President and Community Bank President with Town and Country Bank. He works in Edwardsville where surrounding communities have been significantly impacted by flooding and storms.

Build a Team

Abert advises business owners to develop a network of professionals to help you in all aspects of your business, including disaster preparation.  At minimum, your disaster prep team should include an:

• Attorney – to advise you about liability and your rights in case of a disaster
• Accountant – to advise you about IRS issues and general accounting
• Insurance professional – to determine what disaster coverage you need: loss of income, loss of assets, loss of key employees, etc.
• Banker – to make sure you have adequate financial resources, a plan for loss of income, and to help restructure your debt obligations, if possible, afterward
• Information technology expert – to ensure your data is backed up and protected

“A business owner has to determine what the worst-case scenario would be and plan for it,” Abert says. “If I’m a manufacturer, what if I can’t run my machinery or I don’t have staff to run it because they can’t get to work, what if I can’t purchase product or I can’t ship my products?”

Or, what if your employees don’t have a place to work? Mike O’Shea, President of O’Shea Builders in Springfield, Illinois, faced that scenario on March 12, 2006. That night, a tornado destroyed O’Shea’s headquarters. He remembers looking at the ruined building and making calls near midnight to find a place for employees to work the next morning. Here’s his advice for disaster planning: “It is imperative to have an offsite backup plan for your data.  Make sure you have business interruption insurance and understand the coverages.  Additionally, it is important to have arrangements or at least a good idea of your options for temporary office space.  We called our team together the morning after the disaster to assure them we had a plan to get back to work immediately.”

The U.S. Small Business Administration (sba.gov) recommends these steps to prepare for the big one:

• Create a preparedness program for your business
• Identify and test your critical business systems
• Create an emergency communications plan
• Enroll in the Red Cross Ready Rating program
• Build a disaster preparedness kit

After the Disaster

Immediate communication is essential. “Get in touch with your disaster prep team professionals ASAP to let them know, especially your banker,” says Abert. “Tell them if the disaster has impacted your ability to manage cash flow or make loan payments. Your banker can’t dissolve a loan, but they may be able to defer, delay or modify your obligation until you can work through the repercussions.”  Some banks may have employees who can also help you work with government loans you have through the U.S. Small Business Administration.

Make sure your recovery communications plan ensures “facts go directly to employees, suppliers, customers, and the media,” advises the U.S. Chamber of Commerce.

Additional Information

• U.S. Small Business Administration – sba.gov
• U.S. Chamber of Commerce Foundation – uschamberfoundation.org