Small business owners are likely to worry more about a lack of new business than dealing with a major catastrophe. However, as we’ve seen in recent months, natural disasters such as forest fires, hurricanes, tornadoes, and earthquakes have the potential to disrupt or destroy your business.
Because disaster can strike anywhere, anytime, small business owners need to be prepared to literally weather the storm. While it might seem impossible to be ready for the “unexpected,” you can put safeguards in place to reduce the likelihood of business disruption and loss of revenue. Here are some basic steps you can take to protect your business and employees and offset the impact on your bottom line.
Develop a Plan
One of the most important responsibilities of any small business owner is developing an emergency preparedness plan. Regardless of the location or type of business, every company needs to consider how to protect their employees and continue operations in the event of a natural or man-made disaster.
Depending on the size and scope of your business, this plan may be simple or complex, and you may have to rely on outside resources rather than doing it all yourself. Either way, you and your team will need to work together to identify all of the important issues and considerations. Begin by making a list of the types of crises that could occur, given your location and industry. Planning should include the obvious (a blizzard in the northern states) as well as less likely scenarios (a terrorist attack.)
Creating a business continuity plan is an essential step. Determine what kind of losses would be most damaging to your operations and how long it would take to get your business back online if they were destroyed. You can then develop an emergency recovery plan that details the resources you’ll need and the order in which your business functions should be restored. The Federal Emergency Management Agency’s (FEMA) Ready Business resource is designed to assist businesses by providing tools to create a preparedness program that addresses the impact of numerous hazards.
Establish Emergency Procedures
Make sure your plan includes details of the emergency procedures that need to be taken and by whom. Consider crucial actions such as shutting down machinery or power sources, obtaining flashlights, food and water, and first-aid supplies, and methods for communicating while an emergency is in progress. Identify escape routes and make sure everyone knows where they are. Designate a check-in point or meeting place that all employees should go to if there is an event that only affects your facility and a process for determining if anyone is unaccounted for.
Depending on the nature of the emergency and whether or not there is immediate danger, you may have to decide whether to shelter in place or evacuate. Your emergency plan should account for both possibilities. Perhaps most important of all, be sure each of your employees knows exactly what to do if a disaster occurs and review procedures at least annually.
Keep Lines of Communication Open
Determining how to communicate effectively is one of the most important elements of any emergency plan. This includes how staff will stay in touch with each other as well as with the outside world. While many businesses rely on a basic phone tree to inform staff of emergencies, you will need to plan well beyond this to be ready for a major crisis.
- Make an emergency contact list. In addition to employee contact information, the list should include state, local, and federal emergency phone numbers as well as clients, suppliers, contractors, financial institutions, insurance agents, and any other individuals or businesses you might need to notify.
- Keep laptop, notebook, and cell phone batteries charged. These connections can help you stay in touch during many types of emergency situations. Text messages can often get around network disruptions, and cell phone service may be restored before electricity. It’s also a good idea to keep mobile charging devices at hand.
- Use group emails or post messages to your company’s social media page as long as electricity and Internet connections are unaffected.
- Stay connected to sources of emergency information. It is important to have access to sources for official emergency updates such as TV and radio. Consider investing in hand-cranked or solar powered radios so you can tune in to emergency broadcasts in the event power is lost. Many communities have alert systems you can subscribe to that send instant texts or e-mails about bad weather, road closings, local emergencies, etc.
Identify Alternate Facilities
It may take weeks or months to restore a facility after a disaster. To avoid losing customers who will have to look elsewhere if you are unable to handle their needs, consider alternate facilities where your business can operate temporarily. This may be a local business willing to rent short-term office or warehouse space, colleagues or friends with spare offices or storage facilities, or co-working spaces or your employees’ homes if your business lends itself to telecommuting.
Review Your Insurance Coverage
Having the right type and amount of insurance to protect your business and employees will help you recover more rapidly from a catastrophe. Review your policy or policies with your agent or broker to make sure you understand exactly what losses are covered and what risks are excluded.
Keep in mind that in addition to damage to buildings or equipment, you will need to pay rent, loans, equipment leases, and other expenses whether or not your business is operating. Business interruption insurance can compensate you for lost revenue and cover operating expenses if you have to close your doors temporarily due to damage that is covered under your property insurance policy. If you are located in a flood zone, check with FEMA to find out if you need to have a separate flood insurance policy.
Protect Your Data
Your business data is invaluable and should be treated accordingly. Safeguarding sensitive information from being compromised or destroyed is critical, and methods can vary based on how you store your files. Paper documents such as accounting paperwork and customer information should be stored in fireproof, waterproof cabinets with heavy-duty security locks. Computer files should be backed up to a remote location and backed-up files tested regularly to ensure they can be easily restored after an emergency.
Another way to ensure that your business data stays safe is to store it on a cloud-based server. Many small businesses are using cloud servers because they provide a secure virtual storage solution for all types of files and information. Cloud computing is affordable, and employees can access information from anywhere. This will help prevent business disruption and allow you to continue serving customers or clients in parts of the country or the world not affected by the disaster.
Safeguard Your Inventory and Equipment
Lost or damaged inventory can be extremely costly. Storing inventory above flood level and securing it against extreme weather conditions should be an ongoing operational consideration. Your business equipment also needs to be protected against natural disasters. Secure equipment that might fall or collapse, and keep it stored away from areas of your business that pose risk to your employees’ safety. Computer towers should be placed on desks instead of below them to reduce the chance of damage due to a flood or even a burst water pipe. Remember to keep an updated inventory of equipment, including make, model, and serial numbers, in a secure location or offsite for insurance purposes.
Secure Access to Working Capital
Creating an emergency fund is the best insurance your small business has for recovering from an unplanned, costly event. However, there may times when the financial challenge exceeds available funds. The U.S. Small Business Administration (SBA) provides low-interest disaster loans to businesses of all sizes. SBA disaster loans can be used to repair or replace items damaged or destroyed in a declared disaster, including real estate, machinery and equipment, and inventory and business assets.
You can also consider applying for working capital financing. Summit Financial Resources specializes in financing for small businesses, with lending programs designed to give you flexibility and fast access to cash so you can cover operating expenses and pay your employees and suppliers during any emergency.
Disasters can occur without warning, so it’s important for you to take precautionary steps to protect your small business. Making a commitment to plan now will help ensure the safety and well-being of your employees and give your company a better chance for survival in an emergency situation.
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Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.