Entrepreneurs on the East Coast are struggling through the aftermath of Hurricane Sandy—and, unfortunately, the chances that you could someday be in their shoes are rising. “The number and cost of natural disasters are increasing dramatically,” says Ted Devine, CEO of insureon, an insurance company specializing in small business (and a client of mine). “Nine of the 15 costliest natural disasters in history have occurred in the last eight years.” In the face of what is most likely climate change, how can you protect your business?Begin by identifying mission-critical data, processes and vendors. Talk to your banker, accountant or other professionals, advises Joe Treanor, president and founder of Rosebud Technologies in Woodstock, Georgia. You can also use tools at the SBA’s website and FEMA’s Ready.gov site.
Don't Count on the Cloud
While critical data such as customer records, financial data and inventory are often obvious, Treanor says much crucial info isn’t centralized or computerized. “For example, front-line employees may be using a printout that tells them where to look things up online,” he explains. Ask employees what they need to do their jobs; then make sure that information is maintained, updated and accessible in an emergency.
The cloud is not a panacea, warns Treanor, who says business owners often make fatal assumptions about the level of protection cloud services provide. “Ask all your prospective vendors for specifics on their business continuity plans as well as service level guarantees,” says Donna Childs, founder of Prisere LLC and author of Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery for Small Businesses.
Insurance Ins and Outs
Devine recommends a business insurance policy that provides property coverage and, if you’re in a coastal or flood plain area, flood insurance. Make sure your business property coverage includes the cost of data restoration: “This ensures that software and data, as well as hardware, is protected,” Devine explains.
Get business property coverage that includes a provision for business income/extra expense insurance (sometimes called “business interruption” coverage). Business income insurance pays for loss of profit and continuing expenses such as rent and payroll, and can even include coverage related to damage at a dependent property, such as a key supplier. Extra expense coverage covers the costs of steps to get you get back in business, such as hiring temporary help or renting temporary space.
Some insurers even provide coverage for lost revenue from your website if your Web host is shut down by a disaster. “Insurance policies are all different,” says Devine. “Talk to an expert who understands the risks for your particular industry.”
People and Places
To ensure continuity, identify alternate workspaces. Childs suggests setting up a “buddy system” with a non-competing small business. “Find one within commuting distance, but not so close you’d be disrupted by the same event,” she explains. “That way you have a familiar, alternate place to work without a major expense.”
Familiarity is key, says Treanor. “Create a situation when things are stable that mimics how you might have to act in an emergency,” he advises. Begin having employees work from home and from outside locations regularly so you can uncover potential problems and put policies in place.
For retailers, an e-commerce site could be a lifesaver in a disaster. “It can be a stopgap measure when your physical place of business isn’t available,” Treanor says. “Even if it sells less than 100 percent [of what you sell in-store], it can at least keep you in business.”
Keeping in Touch
Plan how you’ll communicate in a crisis. For employees, Treanor recommends creating a phone tree so everyone isn’t frantically calling each other. For vendors, Childs advises obtaining primary and secondary contacts, with names, direct telephone extensions and e-mail addresses: “That way, in an emergency you aren’t calling an 800-number and being placed on hold.” Also get alternate contact information for vendors, who may not be at their normal workplace in a disaster. Use social media and your business website to let customers know what’s going on and how to reach you, Treanor says.
Last, but not least, consider emotions. “Employees who are worried about their homes and families will have difficulty concentrating on work,” says Childs, whose business was located near the World Trade Center on 9/11. Show employees how the same preparedness tactics you use in your business can help their families, she says, and encourage them to develop their own preparedness plans.
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