While Covid-19 has gotten everyone’s attention this year, the truth is that small business owners have been susceptible to both man-made and natural disasters with increased frequency in recent years. Man-made disasters like as acts of terror, power outages, cyberattacks, major accidents and other pandemic outbreaks and natural disasters such as wildfires, floods, earthquakes, hurricanes, tornados, and blizzards, have made the headlines every year for a decade.
According to the Institute for Business and Home Safety, “about 25 percent of businesses don’t reopen after a major disaster.” Protecting your small business from this fate is easy but requires: educating yourself about the different disaster risks, creating a plan of action, sharing the plan with your employees, and periodically reviewing, testing & updating your plan, as needed. If you haven’t created a comprehensive disaster plan for your business, this is the year to do it !
A good disaster plan includes five steps: (i) prevention, (ii) protection, (iii) mitigation, (iv) response, and (v) recovery.
Prevention starts with financial planning, so working from a budget, knowing your break-even point (or how long you can last in the event of a catastrophe,) establishing a line of credit with your bank, and creating a cashflow forecast to manage your cash reserves.
Every business today should protect their business records by digitizing and backing-up its electronic financial & tax records to prevent their loss. This requires scanning key documents and storing a copy of your records either on the Cloud or in a different location that is safe from any disaster. If a business hasn’t compiled a list of its assets, it should create a room-by-room list of its furniture & fixtures, business equipment and other business assets. If you have an asset list but it’s outdated, taking pictures on your cell phone is quick and easy and can help you to both recall and prove the market value of items for insurance and casualty loss claims.
To mitigate any possible losses, business owners should have a conversation with their insurance agent about ways they can protect their business from disasters. For instance, businesses that use a payroll service will want to make sure that they have a “fiduciary bond” to ensure their payroll in the event of a disaster. Business owners should also have key-person life insurance in place, adequate protection of their physical assets, and a buy-sell in place, if there is more than one business owner. In addition, business owners should, furthermore, consider business interruption insurance.
The key to effectively responding to disasters is to have a good plan. Components of a good disaster plan include:
– Keeping your emergency contact information current;
– Setting up alerts on your cell phone;
– Installing surge protection, smoke detectors, security access and cameras in your building;
– Posting an evacuation plan in your building — which is an OSHA requirement;
– Investing in and staying current with employee safety, CPR, and first aid training;
– Conducting employee disaster awareness training by discussing your community’s warning systems, evacuation routes and where to seek shelter in the event of an emergency.
– Creating a safe room in your building, and/or safe area on your property;
– Determining team member roles in the event of a disaster;
– Deciding how you will communicate in the event of a disaster;
– Sharing your disaster plan with customers and suppliers;
– Coming up with a supply chain contingency plan;
– Assembling a “disaster kit” – which should include wireless cell phone chargers & boosters chargers that do not rely on electricity as a backup to communicate; storing food & water, which should be switched out every 6 months; purchasing batteries, emergency lighting, portable generator first aid kits; and making sure that your phone system has PA capabilities.
– Having a cybersecurity plan, which I discussed in a previous article;
– Creating a “remote worker policy” and
– Reviewing, testing, and practicing your disaster plan annually with your employees.
During the recovery phase of a disaster, the business owner should establish a remote office, obtain access to its business records, restore its payroll and invoicing capabilities, implement its “employee/customer/supplier communications plan,” and resume services once its local new sources has announced that it is safe to conduct business in the area(s) the business serves.
There are several government entities that offer disaster specific information on-line. For example, The Federal Emergency Management Agency (FEMA) is a great resource for information about how to specifically prepare for different natural disasters, and it also has a detailed disaster preparedness checklist that can be downloaded from the Internet.
In the event of a loss from a disaster, business owners should download IRS Publication 584, Casualty, Disaster, and Theft Loss Workbook.
For more information about preserving your equipment and business records, business owners can reference the IRS’ Guide on “Protecting Your Information Before An Emergency Strikes. “
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About the Author
A nationally recognized small to mid-sized business (SMB) expert, Jim Talerico has consistently ranked among the “top small business consultants followed on Twitter.” With more than thirty – (30) years of diversified business experience, Jim has a solid track record helping thousands of business owners across the US and in Canada tackle tough business problems and improve their organizational performance.
A regular guest on the Price of Business on Bloomberg Talk Radio, Jim’s client success stories have been highlighted in the Wall St Journal, Dallas Business Journal, Chicago Daily Herald, and on MSNBC’s Your Business, and he is regularly quoted in publications like the New York Times, Dallas Morning News, Philadelphia Inquirer, and INC Magazine, in addition to numerous, other industry publications, radio broadcasts, business books, and Internet media.
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