“Most small businesses have a lack of preparation and foresight when it comes to disaster planning,” says Erika Hayes James, Bank of America associate professor of business administration at the University of Virginia’s Darden School of Business. “They’re so focused on what needs to happen today to ensure survival tomorrow that they don’t consider random events, natural disasters, building fires and other perils.”

The good news is that disaster planning doesn’t have to be complicated or expensive. James says company owners and managers can start by asking themselves, “What could go wrong here?” If the firm is located near railroad tracks that are used actively, for example, there is always the possibility of a train collision or the release of toxic chemicals. “Consider how these events would affect your business, then do a few test runs and practice how you would deal with them,” says James.

Geographic location also comes into play. Located in California? Then earthquakes are likely your biggest threat. On the Gulf Coast of the United States, it’s going to be hurricanes. Be sure that your insurance coverage includes not only property and casualty, but that it also comprises other elements like business interruption (to cover wages and operational expenses when you can’t conduct business) and additional expense (which covers some key expenses should your firm be out of commission for a period of time).

In this information age, companies also need to protect their data. Back up pertinent company records to an off-site location and/or an online backup service and on a regular basis. Be sure to test your backup system to make sure it works. That means not only uploading and/or delivering the information to the storage source on a regular basis, but also ensuring that the data arrives in good condition and that it will indeed be “retrievable” in the event of an emergency.

Gardner

At D&C Charter Bus Co. in Chicago, vice president and CIO, Reginald Gardner, says his 10-employee luxury motor coach firm uses a two-pronged approach to disaster planning. The first segment addresses the company’s administrative operations (archiving all files on a regular basis and maintaining them off site, for example), while the second covers the operation of its motor coaches (annual safety inspections and updated driver logs, for instance).

Gardner, who during his 11 years in business hasn’t had to implement D&C’s disaster plan, is glad that he puts the time and effort into the exercise. “I spent 30 years in corporate America, where I learned firsthand just how expensive it can be to not have a plan in place,” says Gardner, who reviews, updates and tests the plan on a quarterly basis. “I’m confident that we’re prepared to keep the operations going in the event of an emergency.”

James says getting key people involved in the planning process can go a long way in ensuring a successful effort. Assemble a team that will not only formulate and test the plan, but that will also inform the rest of the workforce of its importance. “If the last few years are any indication, crises are not always ‘rare’ events,” says James. “The firm that can devote even a minimum amount of attention to disaster planning – and to crafting a solid crisis plan – stands a much better chance of surviving.”

Disaster Planning Tips

–Don’t wait until it’s too late – plan now.
–Don’t forget to back up your important data daily.
–Review your insurance coverage regularly.
–Consider business continuity insurance to cover your assets in case of a disaster.

Resources

SBA’s Disaster Planning Guide for Small Businesses

Ready Business (FEMA)

Further reading

“Staring Down Disaster,” April 2009 Issue

“We had spent several days painting and putting up wallpaper,” recalls CEO Sean Fields, who co-owns the company with his wife. “Two days later I walked into our office and standing water and ceiling leaks were everywhere.” Burst water pipes flooded several floors, including Comtactics’ office; about $75,000 worth of computers and digital equipment were destroyed. As of February, the building was still shut down until further notice. While the company was displaced (Comtactics recently relocated to downtown Dayton) for about two months, Fields, 38, and seven employees ran the business from their homes. “We are now challenged with providing documents to the insurance company and relocating, all while meeting project deadlines,” says Fields.

No matter how much forecasting business owners do, they can never predict exactly when or how a disaster will strike. Technology provider Hewlett-Packard and SCORE: Counselors to America’s Small Business, a Washington, D.C.-based organization that advises entrepreneurs, teamed up to compile research showing the impact of disasters on small businesses. Among the findings: 43% of businesses that experience a disaster without an emergency plan in place never re-open.

“A business disaster is that point in time when you cannot provide your customers and clients with the minimum level of goods and services they need and expect,” says Diana L. McClure, business resiliency program manager for the Institute for Business and Home Safety in Tampa, Florida. This 501 (c) (3) organization is supported by the property/casualty insurance industry and promotes disaster preparedness among small and mid-sized business owners.

Mother Nature—which can bring destruction in the form of hurricanes, tornadoes, and floods—isn’t the only threat. Common man-made disasters include fire, data loss, and robbery, experts say. And small businesses are particularly vulnerable because they’re less likely to have large cash reserves to handle a crisis, or risk managers on staff to anticipate one, says Laurence Barton, author of Crisis Leadership Now: A Real-World Guide to Preparing for Threats, Disaster, Sabotage, and Scandal (McGraw-Hill; $39.95). But disasters don’t have to be devastating. The following steps can help business owners prepare.

ASSESSING THE RISK
At the heart of disaster preparedness is a business continuity plan, a strategy for operating in an emergency situation. Creating one makes good business sense, says McClure, since customers may flock to a competitor if a business’ operations are disrupted. A business continuity plan can boost the bottom line, Barton adds, particularly if a business owner sells his company, because “a business valuation will be higher if you’ve never had a major disaster disruption.”

To gauge the vulnerabilities specific to your business, take the following steps:
Identify industry-specific risks. Research businesses like yours that have experienced calamity, such as earthquakes, fires, or robberies, Barton suggests. Learn what these businesses did and didn’t do as well as what worked and what didn’t so you can include proven strategies within your own company’s plan.

Check insurance policies. Without adequate insurance, a business can be forced to close. That’s what happened to Angelique Moss-Greer’s Clarksville, Tennessee-based herb shop Natural Choices Botanica when it was destroyed by a tornado in 1999. When submitting a claim for the damage, Moss-Greer, now 39, learned that her policy did not include coverage for wind damage, costing her tens of thousands of dollars. “I lost everything,” recalls Moss-Greer, who had pumped more than $100,000 in savings into her business over the previous seven years.

To avoid such devastation, Randy Screen, chief insurance marketing executive officer for Winston-Salem, North Carolina-based insurance provider BB&T Insurance Services, recommends checking in annually with an insurance broker and asking, “What am I not covered for?” Coverage for some losses such as those due to wind, earthquakes, and crime may be excluded from standard policies. Consider acquiring business interruption insurance since it replaces lost income while a business is shut down; and be sure to keep an updated inventory including pictures of office equipment on hand, in case you need to file a claim later.

Prioritize processes. Identify the core functions that keep your business running, such as servicing current customers. That’s what your plan will focus on, says McClure. In the event of a disaster, all other tasks can wait.

CREATING THE PLAN
With a thorough risk assessment, a business owner can start thinking of alternative ways of working. After Fields got over the initial shock of seeing his office flooded, he knew he still had Websites to build. And he was prepared. He had already replicated the company’s computer systems on his laptop, so he was able to set up shop at home. Though he needed to travel to visit clients or meet them at coffee shops, “We were still able to invoice everybody, and we were still able to get projects out,” Fields says.

To make sure your business can keep running during a crisis, think proactively:
Find an alternative location. If your business can’t be run remotely or virtually, identify a backup location to operate from temporarily or make agreements with a similar business to use their facility or equipment in an emergency, McClure says.

Create a data backup system. Not only should you keep copies of insurance policies and property records in a safe place, but make copies of employee contact information, vendor contracts, and customer data to store in a separate location as well. The same rules apply for electronic data. “A small business owner might decide to back up his critical data on a disc or USB flash drive or external hard drive, but if he keeps it on the same desk that the computer is on and the building burns down, the backup does him no good,” notes McClure. All of Comtactics’ data and sensitive materials were backed up on a remote server that executed a 72-hour automated sync process.

Also, create a manual with all computer passwords and software product keys and store it in a separate, safe location. “The first thing you need to do when the server crashes is assess the damage and cause, and try to ‘rebuild’ the server with software tools and the operating system,” says Marcus Simpson, vice president of marketing and information technology consultant for Lexington, Kentucky-based Technology Consulting Group America. “After the rebuild, the backup data can be restored back to the drive.”

Get everyone involved. Let employees know where to report or whom to call in an emergency. By sharing details of the plan, you create buy-in and employee loyalty, says Becky Marquis, deputy director of the U.S. Department of Homeland Security’s Ready Business Campaign, which helps business owners minimize the effects of a disaster through planning. Go to www.Ready.gov and click on Ready Business for lots of helpful planning resources.

Talk to suppliers. If you depend on certain suppliers, have a backup on hand in the event business is disrupted because of an emergency. Also, speak with your suppliers beforehand about how they would get products to you if you ever needed to relocate quickly, Screen suggests.

While no one likes to imagine the worst, “the key to getting through a disaster is thinking of every kind of risk that could hurt your company,” says Barton. He adds that doing so won’t make you pessimistic. “It will make you a very smart business owner.”

This story originally appeared in the 2009 issue of Black Enterprise magazine.