Creating A Well-structured Disaster Plan

Planning for the unexpected could help save a business from ruin.

(Friday, November 11, 2005) - The active hurricane season has put a spotlight on something that all small business owners should think about: disaster and business interruption planning.

With all the demands that come with running a small company, it might be easy for business owners to look at news coverage of far away cities ravaged by hurricanes and other natural disasters and say, “that won't happen to me,” but they shouldn't feel so secure.

“The hurricanes were just a dramatic example of what can happen,” says Barbara Weltman, an attorney, small business expert, and author of several books on small business. “A small business can experience all kinds of disasters with fire being a common occurrence.”

A tornado, blackout, chemical spill, flood, loss of a key supplier, or even a water main break that keeps customers from being able to access the street where a store or office is located are just a few examples of events that can create major hurdles for small businesses. Those problems multiply without proper planning. In fact, of all businesses that close down following a disaster, more than 25% never open their doors again, according to the Insurance Information Institute.

Thomas Kinslow, president and chief executive of A Dewey Does Corp., a licensing company that produces a line of children's books, clothing, and other products based on a 9-year-old motivational character who loves sports, has had his own share of unexpected experiences that have slowed business.

After an earthquake in Turkey put the manufacturer of Dewey Does clothing out of business, the Staten Island, N.Y. company wasn't able to fill orders. After that experience, Kinslow, diversified his supplier base and found U.S.-based manufacturers who were within a short drive of his office. Still, the earthquake wasn't the only time something unexpected put a crimp in Kinslow's business plans. After the Sept. 11 terrorist attacks, communications with suppliers became so difficult that it hurt the company's income for about six months, Kinslow says.

Business interruption insurance is just one of the pieces of a plan that Kinslow, who was an insurance broker before starting his company, could have had in place to make the periods following the earthquake and the terrorist attacks less painful.

“We didn't have [any business interruption insurance],” Kinslow says. “I was an insurance broker -I should have had enough sense to have had it. That was the ironic thing about it. I knew the coverage we should have, but you never think [something] is going to hurt you like that.”

That assumption is typical among small business owners, according to Roosevelt Haywood III, president and chief executive of Haywood and Fleming Associates, a Gary, Indiana-based commercial insurance broker.

With business interruption insurance, a business owner can buy protection that can replace income and pay expenses such as rent, salaries, and other bills if something unexpected occurs that stops a business from functioning normally, Haywood says. “There are businesses that have lost money because of a fire or natural disaster,” Haywood says. Business interruption insurance “provides a business an income stream.”

For some small businesses, business interruption and disaster plans could be as simple as making sure that its files and customer contact information are backed up and stored in another location, Haywood says. All too often, small business owners back up files on disks and then store them in their desk, which doesn't help in the event of a flood or fire. For her own business, Weltman says that for about $50 a month she has hired a company that automatically backs up her files and stores them on a server in a remote location.

There are free resources on the Internet to help small business owners craft their own disaster and business interruption plans. The Institute for Business and Home Safety has a free disaster planning toolkit and a guide for small business owners following a disaster at www.ibhs.org/business_protection and the American Red Cross has free planning guides at www.redcross.org. The Small Business Administration provides information on disaster recovery services at www.sba.gov.

A Few General Disaster Planning Tips:

1. Have an evacuation plan in place if the disaster happens during the workday. If your business must remain open during a disaster have extra supplies on hand such as water, food, flashlights and extra batteries.

2. Put a plan in place for employees to contact you.

3. Find an alternate location for your operations or an alternative for your customers ahead of time-preferably in writing. Consider crafting an agreement with a competitor to work from each other's locations or to service each other's customers in an emergency.

4. Consider adding business interruption insurance to your business insurance policies and make sure you understand exactly what is covered.

5. Store critical information in an alternate location.

Gordon Bridge, president and chief executive, CM IT Solutions offers tips for data back up and recovery:

1. Make sure ALL critical files are backed up.

2. Perform a clean up and permanently archive old files at least once a year to save space.

3. Consider hiring an outside firm to keep your computers in good working order.

4. Test your backup at least once a quarter. Tape backups can be corrupt without your knowledge.

5. In the event of a disaster such as Hurricane Katrina, don't assume computers are damaged beyond repair. It is possible that a data recovery company may be able to recover the data, even if the hard drive is damaged or wet. If the hard drive or media involved in the disaster is submerged in water do not dry it off. Keep the media submerged. Water, especially salt water, drying on the platters of a hard drive can leave residue and be detrimental to a successful recovery.

View all CM IT Solutions Press Releases

This article has been read 282 times.

Printer Friendly