As a small business owner, your family’s livelihood – and that of your employees – depend on you keeping the business running. That’s true in good times and bad.
Mom-and-pop businesses take a devastating financial hit after a disaster. Inventory loss. Food spoilage. Temporary closure. Companies may spend weeks or months replacing flooring, walls, retail cases and equipment, and then reopen with immediate financial obligations to suppliers and staff, while competing for customers who are also suffering and are now focused on need-based purchases.
Small retailers may lack sufficient cash reserves to make required repairs, and suppliers and delivery companies may be affected by the same disaster, compounding recovery challenges and business continuity efforts.
Let’s look at ways to minimize the pain of a major disaster to your company.
Have a Business Continuity Plan in Place
Just as it took a great deal of planning to get your business off the ground, you may need to start over after a hurricane or fire, only under dire circumstances. According to Nationwide, only about one-third of small businesses have a formal business continuity and disaster recovery (BCDR) plan in place. Creating a plan might seem like “one more thing to do” when business is thriving, but it’s critical to whether your company makes it through a disaster.
Here are a few action items to consider, especially if you live in a disaster-prone area:
- Create a list of the vendors and suppliers you use now, as well as backups. Spread a wide net. Your usual sources might not be available when you need them.
- Identify businesses that could temporarily service your customers until you’re up and running.
- Take photos and video clips of your business, inside and out. You may need them to compare to after-disaster conditions for insurance purposes or to secure a loan.
- Contact your creditors to find out if you can defer loan payments for a period of time after a disaster.
- Each year, purchase a three-day supply of nonperishable food items and one gallon of water per day for each employee, just in case you get stranded.
- Contact a few restoration companies to find out about their services, and to learn about experiences they’ve had helping companies rebuild and reopen.
See the Disaster Readiness Part 1: Creating a Plan blog post for more information on disaster planning, and visit the U.S. Small Business Administration (SBA) website to use its disaster plan.
Get the Best Insurance Coverage You Can Afford
Make sure your business is properly insured. The two main types of insurance to investigate are commercial property and business interruption.
Where commercial property insurance covers costs to repair or restore your business property, business interruption insurance provides financial assistance for loan payments, payroll and so on. Get multiple quotes and read the fine print. Some policies don’t cover flood damage or “acts of God,” for example, and you might need a rider. Find out if each policy offers replacement costs as opposed to actual cash value.
Some business owners recommend policies with the lowest deductible to maximize available cash following a disaster. Although you can use credit for many purchases, you’ll need cash to pay employees to help you get up and running again.
Working through a Crisis
Disaster preparedness sites typically cover the same common sense actions to take as a disaster strikes, the most important being to ensure the safety of employees and customers. Then begin securing the property and contents:
- Disconnect electrical equipment and turn off the gas at the main valve (if instructed by your local utility), and move equipment onto higher shelves.
- Turn the refrigerator or freezer to the coldest setting, and store food in walk-in freezers (as high up as possible) along with buckets of frozen water.
- Board all windows, and secure and sandbag the doors.
You may have to set up operations at a temporary location, or just change how you conduct business in the short term. For example, a business that ships products should consider moving inventory to a location outside of the disaster area and ship from there. You could use a fulfillment service to keep orders moving with little down time until your employees are ready to take over again.
Contact the SBA, FEMA and Other Aid Sources
The SBA offers two types of disaster assistance loans, one for physical damage and another for economic injury. You can apply for both types of loans online. The Federal Emergency Management Agency (FEMA) also offers aid to businesses affected by disasters.
Both organizations, as well as insurance companies and banks, require business financial statements and documentation to prove what you had before a disaster and its condition, and what you’re left with after the crisis. To be able to apply for loans and settle claims as quickly as possible, keep current digital records (including photos) in the cloud.
Some states have small business development centers, which are typically public-private partnerships, that may issue loans to small businesses for post-disaster recovery efforts. Crowdfunding sites like GoFundMe may also be an option.
Reach Out to Customers
Once you’re past the initial crisis, let everyone know how you’re doing. Are you open? Post on social media! Add a photo of the business on your website and Facebook page, and tweet the news to your followers. If you’re operating at reduced hours or have a new location, mention that too. Customers will want to know how you’ve fared, so share some details of the journey you’ve been through.
To bring customers back, consider offering an enticement or a thank-you for loyalty, such as a “storm” discount or a free food item.
Also, check in with your local chamber of commerce to let them know if you’re still in business or when you expect to reopen. Many chambers post lists of “reopened” businesses after a natural disaster to help get the word out.
Disasters are scary. But consider the challenges you face regularly just being a small business owner. Apply that same moxie to recovery by being over-prepared and aiming for business continuity success.