Emergency Planning for Small and Home Businesses

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What would you do if a disaster struck your business? Most disasters aren't preventable, and many aren't even predictable. But you can take steps in advance to minimize your potential for loss from catastrophic events. Here are some guidelines.

Disaster recovery
Image source: Photospin.com

What would you do if a catastrophe struck your business? While most business owners don't expect much (other than a lack of business) could do them harm, as we've seen in recent years, there are any number of relatively "common" disasters such as hurricanes, tornadoes, flooding rivers, fires and even earthquakes that can potentially disrupt your small business.

Although most disasters aren't preventable, and many aren't even predictable, you can take steps in advance to minimize your potential for loss from catastrophic events. Here are some guidelines.

Develop a Disaster Recovery Plan
The specifics of such a plan will depend to some extent on the nature of your business, but here are some areas you'll want to address.

Know Your Achilles' Heel
Actually you will have several of them. Determine what types of losses would be most damaging overall to your operation. Would your business go down the tubes if your accounts receivables files were destroyed? What about your customer list, contact list, or all the procedures you've developed for your independent testing laboratory? How long would it take you to get back in business if they were destroyed? Once you identify these critical operations, write an emergency recovery plan that details the priority order in which your operations should be restored and where the resources to restore each business function can be found.

Related: 3 Ways to Keep Disasters from Ruining Your Business

Computer Data and Vital Records Protection
Most businesses never stop to realize how much their ongoing business depends on documents, forms, programs, employee records, customer correspondence, contact lists, and accounting information that has been developed or collected over the years they have been in business.

To minimize losses, make duplicates of all of your company's vital records, computer data, video tapes, customer lists, accounting data other documents or media that are essential to your business operations.

Related: Preparing for Disaster

For any data that requires a computer program to access, be sure you have a copy of the software as well as a copy of the data file that contains your records. (For custom software and enterprise level applications, consult your vendor to determine how to best protect your records.) Store these duplicates off-site in warehouses, in cloud-based back up resources, or other facilities specially constructed for data and record storage. Look for a facility that is located in a different town from yours, too.

If you just have a small amount of records or data to store, put them in a bank safe deposit box, or if there are no other options available to you, store them at a relative or associate's office in a distant location. Be sure to update the backups regularly, too. All the backups in the world won't do you any good if they are a year old, or if they are stored in your office and your office building burns down.

Don't forget your web site.
Be sure you have current backups of that even if your host site claims to make daily backups. One large hosting company in NY recently had a hard disk crash, and despite claims of daily backups, were unable to restore the data from mailing lists they operated for their customers. The reason: their backups were too old. Any of their customers who had not captured the names from the mailing list program and stored them on their own computer systems were out of luck. The names were gone.

Identify alternate business facilities that could be used in a pinch
It can takes weeks or months to restore a facility after a disaster. While your customers may be sympathetic to your situation, if you can't handle their needs, they will have to look elsewhere to for someone to serve them. To avoid losing market share to your competitors, consider what alternate facilities you might use to operate if a disaster should hit your business. Among these alternate facilities that will rent office or warehouse space for short terms, friend or neighbors with a spare room or spare office, or even your employees' homes if your business is one that would lend itself to telecommuting.

Make an emergency contact list

Your contact list should include state, local and federal emergency phone numbers; phone numbers, addresses and email addresses if available for major clients, suppliers, contractors, financial institutions, insurance agents, radio and newspapers, and any other individuals or businesses you might need to notify if there was a disaster. You should also have complete contact information for your employees and corporate officers. Keep the contact list stored offsite so it is available in case of disaster. Keep a printed copy of your contact list as well as any electronic copies in case you can't access your computers.

Be sure your employees have emergency contact information for your business, too. This should be some offsite location they can call to get information in the event of a disaster and to notify the company, family and friends that they are OK.

Inventory your equipment, software, and library
Keep the make, model number, serial number and purchase price. You'll need the information for the insurance company and for the IRS. Photos of your equipment in use in your office can also help document claims. Be sure a copy of your inventory list and images are stored in a safe deposit box or other safe place off site.

Keep notebook computer batteries and cell phone batteries charged
Notebook computers and cell phone connections can help you stay in touch with associates during some disasters.  During natural disasters, cell phone service may be restored before electricity. Keep one copy of your contact list on your notebook computer so that you can pick it up and carry it out of the building if you are onsite when an emergency occurs. If you don't already have one, invest in a mobile charging device that lets you charge phones, laptops and tablets from your automobile. 

Develop a set of simple procedures to follow during a disaster
Be sure each of your employees know what steps they should take if a disaster occurs. Consider things such as crucial valves that need to be turned off to prevent explosion, backup power supplies, location of first-aid supplies, and methods for communicating instructions to employees and/or customers while an emergency is in progress.

Keep the emergency plan simple, but be sure it lists the critical steps that need to be taken and by whom. 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 emergency such as a roof cave-in that only effects your facility. Having such a check-in point makes it easier to determine if anyone is unaccounted for.

Be sure you have adequate insurance
The obvious losses you might suffer in a disaster (damage to buildings, equipment, etc.) aren't the only possible risks you face. Rent, loans, equipment leases and other expenses will have to be paid whether your business is operating or not. Furthermore, you could be held responsible for damage to any property held on your site for others (for instance, clothing if you are a dry cleaner; computers if you repair computers.)

If your business is home-based, don't assume your homeowners' insurance policy will cover business casualty losses. Business equipment in you home may not be covered at all, or if it is covered, losses may be limited to under $2,500. If you don't already have it, ask your insurance broker about an endorsement to your homeowners' policy to cover an office in the home, or get a separate business owners' policy.

Check, too, to see if the amount of coverage on homes or buildings you own  is sufficient to replace the home and contents at today's prices. Policies just a few years old may leave your building  and property drastically underinsured even if your policy adjusts yearly for inflation. 

Read the entire policy
It's unlikely that a quick glance at the front page of your policy will tell you exactly what losses are covered, so read the entire policy. Pay particular attention to what risks are excluded. Even if you have a business owners' policy, you may find that employee theft, machinery breakdowns or other perils are not covered. If you are located in a flood area, you will probably need to get a separate flood insurance policy, too. Information about flood insurance is available from the Federal Emergency Management Agency (http://www.fema.gov/nfip/). Pay careful attention to whether or not your computer equipment, software and computer data are covered, too. Those may need to be covered under a separate policy. If there is anything that isn't clear, ask your agent or broker to get you a clear explanation.

Set aside a sum of money for emergency recovery
In some parts of the country, insurers have been increasing the deductibles for damages due to hurricanes or other major catastrophes.  If you are in one of those areas, and  the roof blew off your business, or a tree fell through your house during certain types of storms, you would not be reimbursed for the total value of needed repairs. In fact you might have to pay as much as 5% of the total policy value out of your own pocket  before insurance moneys kicked in. Thus, if your home is insured for $500,000 and a tree crashed into it during a Category 1 hurricane, you'd be on the hook for the first  $25,000 worth of repairs.

Business Interruption Insurance
Be sure your business owner policy includes business interruption insurance and insurance for extra expenses. (Extra expenses would be costs over and above your normal operating costs that you need to spend to keep the business going during restoration.)

© 2013 Attard Communications, Inc. All rights reserved.

About the author:
Janet Attard is the founder of the award-winning  Business Know-How small business web site and information resource. Janet is also the author of The Home Office And Small Business Answer Book and of Business Know-How: An Operational Guide For Home-Based and Micro-Sized Businesses with Limited Budgets.  Follow Janet on Twitter at http://www.twitter.com/JanetAttard.

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