Disasters can be deadly for small businesses.
According to data from the Small Business Association (SBA) and the Federal Emergency Management Agency (FEMA):
- 40% of businesses don't reopen after a disaster.
- 25% fail within one year after a disaster
- 90% fail within two years.
To assess the chances of your business surviving disaster, ask yourself a few important questions.
- Can you operate your business if you don't have access to your primary location?
- Can your employees continue to work?
- How long can you meet payroll if you aren't getting income from your business?
- Can your customers contact you and will you be able to respond to their needs?
Here's what to do to stay in business
Being prepared can improve the chances that your business will beat the odds, recover and thrive. Ensure your survival by taking these 10 key steps.
- Identify threats. Don't put your head in the sand. Yes, bad things do happen to good businesses.
- Stay alert. Some forms of disaster like tornados don't give much warning. Have a weather alert on your mobile phone and pay attention.
- Involve employees in devising key steps to take before, during and after a disaster. Include people with special needs in the planning process. Keep the resulting plan as simple as you can.
- Create an emergency contact list that includes how to reach employees, vendors, suppliers and any other key stakeholders. Keep the list up to date.
- Store and/or post the plan somewhere you and your staff can find it. Try it out when there isn't an emergency and see how it works.
- Keep vital information at a secure off-site location. That can include building plans, insurance records, banking and investment information, and passwords.
- Be prepared to be offline in this online world. Talk to your Internet provider about what you can expect in an emergency. Devise a backup strategy to keep the cash register and other key electronics working.
- Think about purchasing a back-up generator or a solar power station.
- Consider what kinds of insurance you need. Before buying a policy, ensure you understand what's covered – and what's not. Don't forget business interruption insurance. It will pay the costs of getting you and your business back on your feet.
- Whenever you decide to self-insure or take a large deductible, calculate the costs and decide where the money will come from.
Disaster comes in many forms
Flooding can happen anywhere. Here are some special precautions to take if you have a building with any flooding risk.
Valves. Backflow prevention check values stop floodwater from entering where utility and sewer lines enter your building. Choose the newer high-tech valves that alert you or your staff to a problem. Get a knowledgeable plumber to do the installation. This isn't a do-it-yourself project. While the plumber is there, ask the person to clear the main sewer valve, a frequent source of flooding.
Flood shields. When water seeps in, flood shields activate self-sealing rubber gaskets. As the water rises, it pushes up the flood barrier and holds it closed until it is fully extended. It is held shut by hydrostatic pressure. These devices can work to seal off any door or window.
Watertight walls. Build watertight walls within your workplace that seal off areas susceptible to floodwater damage. That includes your mechanical room.
Think high. Install pumps, generators, and battery-powered emergency lights well above the high-water mark.
No leaks. Anchor fuel tanks because they'll leak if they float away. It is also smart to inventory other hazardous materials. Get rid of unnecessary ones and ensure the remainder are securely packaged in leakproof containers.
According to NOAA's National Weather Service, you are likely to get a warning no sooner than 13 minutes before a tornado touches down. That's not enough time to do much, so making smart preparation exceedingly important. Tornados can occur anywhere, but in the U.S., they most commonly occur in Tornado Alley: eastern South Dakota, Nebraska, Kansas, Oklahoma, northern Texas, and eastern Colorado.
Here are some preparatory steps.
- Purchase a battery-powered emergency preparedness system so you can monitor tornado warnings. If you get a tornado warning, don't delay.
- Identify a shelter location for the building. The best place is in a basement. If you don't have a basement, choose a place on the lowest floor that doesn't have windows. It might be a bathroom or a large closet. Don't shelter in a large, open room like the company cafeteria, even if it doesn't have windows.
- Share your tornado plans with your employees and hold a practice tornado drill. Be especially conscious of the needs of employees who have mobility issues or may need other special assistance.
Hurricanes and Tropical Storms
Every year, storms take a toll on an increasing swath of coastal locales, particularly Atlantic and Gulf of Mexico coastal areas, Hawaii, some parts of the Pacific Coast, Puerto Rico, and the U.S. Virgin Islands. Besides strong winds, heavy rains, and flooding, hurricanes and tropical storms bring storm surges that can cause damage in areas far from the eye of the storm.
If you are in a hurricane-prone area, the precautionary steps should be in your playbook annually. While you'll probably have several days' notice of an upcoming storm, that is still too late to take the big steps that can keep you and your property safe.
Insurance is vital. Talk to your agent and understand what your policies will cover and the deductibles. Many policies in hurricane-prone areas have high deductibles specifically for claims related to named storms. Named storm deductibles are usually a percentage of your coverage, ranging from 1% to 20%—up to $200,000 on a $1 million policy, for instance. This can be a big expense. It is important to know not only the amount of the deductible but also where you'll get the money to pay it. If you're buying flood insurance, buy well before storm season begins. The policy has to be in force for 30 days before it will pay a benefit.
Meet code. New buildings that meet current building codes withstand hurricanes better than old buildings. If you own an old building, hire an engineer to inspect your property and tell you how to strengthen the structure against wind and flooding. Old roofs are particularly vulnerable. Likewise, inspect your property for permanent structures that aren't well anchored against strong winds, including signage, fencing, outbuildings, and landscaping. Consider storm shutters for your main building as well as auxiliary ones.
Tie it down. Once a storm is on its way, anchor or remove items that are loose and could become missiles in high winds. That includes outdoor furniture and decorative or temporary signage. If you can move these far out of harm's way, that is the best solution. If not, tie them down.
Empower yourself. If you are near the eye of the storm, you will almost certainly lose power. The power company may shut it off. To prepare for that, fill the fuel tanks of generators, portable fire pumps, and all the tanks of company vehicles. Fully charge power stations. Unplug electronic equipment and any appliances during the storm to avoid power surges. You can leave them plugged into a generator or power station.
Don't hesitate. If you are told to evacuate, do it, and encourage employees to leave the area as well.
Have cash on hand. After the storm, you'll likely need it to get your business up and running. For instance, cash allows you to make change when you are unable to accept credit cards because you don't have electricity and/or internet.
A wildfire is 40 miles away and moving fast in your direction. What should you have done to be prepared?
Wildfire risk is everywhere and increasing, according to the Insurance Information Institute. States with the highest risk are California, Texas, and Colorado. But as temperatures rise, these destructive fires can happen in many other places.
Here are the steps that the Federal Emergency Management Agency suggests that businesses take to protect themselves from wildfires.
Create three zones around your business designed to slow and, hopefully, stop the fire. You probably can't do all this at once, so have a five-year plan to fireproof your property.
- Zone 1: Zero to five feet from the building. Don't put plants near your building. Instead, pour concrete walkways, stone patios, rock gardens, and other non-combustible surfaces. Remove any vegetation that hangs over your roof.
- Zone 2: Five to 30 feet from the building. Trim shrubs and keep them healthy so you don't have dying branches that can easily catch fire. Position storage buildings at least 30 feet from your building. Prune tree limbs, so none are closer to the ground than 6 feet.
- Zone 3: 30 to 100 feet from the building. Thin trees and shrubs. Cut trees whose crowns are more than 10 feet from each other.
Work with your fire department to have a fire hydrant no farther away from your building than 250 feet. Encourage the fire department to regularly maintain the hydrant. If you don't have a hydrant, consider adding a water tank or cistern.
If you are building or adding onto your property, try to opt for brick or concrete. Choose roofing with a Class A fire rating, like metal. Pick windows that are built to be fire resistant and add metal screening that will repel flying embers.
Have effective firefighting equipment, including dry chemical fire extinguishers and high-pressure water extinguishers for putting out brush fires. Keep a 100-foot garden hose hooked up to your outdoor spigot and regularly water the area around your building, especially during those times of the year when there is a high risk of fires.
Document all the precautions you have taken with video. This will improve your chances of receiving a payment from your insurer.
If you are told to evacuate, follow instructions immediately. On your way out, turn off natural gas, propane, and fuel oil at the source. Close and lock all windows and doors. Only return to the area after it has been officially declared safe.
It is smart to have an evacuation plan. Start by figuring out the best route. Create a communications system, so everyone gets the message. Practice the evacuation plan so your employees know where to go and can help customers and other non-employees leave.
In some instances, having respiratory protection equipment could be a good idea, but this isn't a simple decision. The Centers for Disease Control and Prevention discussion of this issue is a good place to start.
Earthquake damage in the United States costs more than $4.4 billion a year, according to recently released estimates from FEMA. About 84% of that is in California, but there is also a substantial risk of earthquakes in Oregon, Washington, and South Carolina.
You typically only get a three-to-five-second warning that an earthquake is imminent. Preparation is key if your business is going to recover from an earthquake because the damage can be substantial.
Start by having your building inspected by a structural engineer. Bringing the building to code is first, but the engineer may suggest other things. These include bracing framing, walls, columns, and foundations. Anything that is unreinforced will probably get the engineer's attention. It is also important to have an expert inspect other nonstructural systems, including air conditioning, elevators, and communication systems, to identify ways to help these survive intact.
Train your employees to react quickly if there is an earthquake. A good training program will help you and your employees know what to do and act quickly when an earthquake occurs. Employee earthquake safety training should include practicing drop, cover, and hold on in a safe place until the shaking stops. The Occupational Health and Safety Administration (OSHA) suggests practicing this at least twice a year.
It is also important to identify building evacuation routes. These should include taking the steps instead of the elevator. Be sure to talk about how to evacuate employees who are physically challenged. Arrange furniture and other things so they won't block aisles if they fall over.
Warn workers to beware of fires. An earthquake may cause alarms to go off, and it could be a false alarm, but fires are common in the aftermath of an earthquake, so ignoring alarms is a bad idea.
More than 400,000 small businesses were lost during the COVID-19 crisis, according to the nonprofit think tank Brookings Institution. Brookings points out that most weather disasters are short-lived, which gives a proactive small business a chance to survive and stay in business. Pandemics have the potential to last for years, making them especially deadly for businesses without deep pockets.
Karen Mills, former head of the Small Business Administration (SBA) and now a Harvard University Fellow, says that whenever the next pandemic or any disaster comes, small businesses should take these four important steps to survive.
- Look hard at costs. Would your business make more if you could cut your electric bill by staying open for fewer hours? Can you eliminate marginal services and products on which you make less money? Are there low-cost but high-value services that you can emphasize?
- Use email, social media, and online platforms to reach customers. You don't need a website, but if you aren't savvy with things like Facebook, Nextdoor, Instagram, etc., learn to use them now. They are good sources of low-cost advertising, whatever your situation.
- Understand and concentrate on the needs of your most loyal customers. Not only will they provide steady revenue, but also their word-of-mouth advertising is invaluable.
- Take advantage of government aid. During the COVID-19 pandemic, there were a number of federal, state, and even local initiatives aimed at helping small businesses. Some were not easy to access, but businesses that managed got valuable assistance. Keep your eyes open for these programs, and don't hesitate to use them.
Turning Disaster into a Success Story
You may qualify for SBA disaster assistance if your business is in a federally declared disaster area. You not only can apply for a disaster loan, but also SBA resource partners are available to help you apply and to offer invaluable advice about rebuilding your business.
Reopening quickly can put you back in the black. To do that, consider before disaster hits what it might take to be in business if you don't have the following:
- Access to your building
- Phones or other communications
- Fuel and most transportation
- Credit card systems and cash machines
Once you have identified how you would deal with these problems, put in place solutions while you can do it at your leisure.
Many disasters have a narrow geographic impact. The basic ingredients for success could be 100 miles away or less. Figure out how you might get services and bring them back to your business location.
Take it a step at a time. Basics are vital, so have plenty of water and food available where you are. Then identify where the nearest working power and cell phone towers are. If your vehicle's fuel tank is full and you have additional fuel, evaluate your situation and analyze what it might take to go where you can replenish.
Contact your customers and tell them you are all right and about to be back in business. Give them a timeline for when you think you can offer at least partial service. Answer their questions and reassure them that you understand their problems. You'll encourage customer loyalty if you can open your doors with even partial services.
Do well by doing good. Agility Recovery, whose business helps businesses prepare for disasters, points to one of its customer's successes in turning disaster into an opportunity. A well-prepared insurance firm in Missouri opened its offices after a storm to people without power or water, allowing them to fill jugs with clean water and power their phones. Agility says that the company's generosity was low cost and ultimately very good for business.
Disasters are terrible for everyone involved, but good planning can improve your situation and bring optimism to your company's outlook and future.