Emergencies can and will happen, and often when we least expect them to. If you own a small business, then knowing how to properly prepare for and respond to an unexpected crisis can be the deciding factor between the recovery of your business and it’s permanent closure.
There are many variables to consider when setting up your small business disaster plan such as: the safety of your employees, liability issues, asset protection, and data recovery. As a small business owner, you should be familiar with the following five areas of business crisis management and take any necessary, applicable steps to ensure the safety of yourself, your employees, and your business.
1. Business Insurance. In an effort to keep costs to a minimum, many small business owners avoid taking out even the most standard insurance policies. While you may indeed save money on monthly premiums, it may cost you big time if you end up needing coverage later on. For small and home-based businesses, there are five types of insurance to consider:
- Comprehensive general liability insurance- This is a catch-all form of liability insurance that covers claims for bodily injury and property damage as a result of visiting the business’ property, using products or services offered by the business, and even the damage caused by the negligence of an independent contractor.
- Workers’ compensation insurance- If you hire employees, then worker’s compensation insurance will provide financial coverage in the event of a job-related injury or disease. Policies vary, but you can typically opt for the coverage of medical care and rehabilitation as well as compensation in the event of death or disability.
- Business property insurance- This form of business insurance protects you against the loss of inventory or equipment in the event of a flood, fire, or other disaster.
- Business credit insurance- Credit insurance protects the insured business from clients who fail to pay their invoices due to insolvency or bankruptcy. Credit insurance usually covers a portfolio of the business’ customers, but it is also possible to cover single transactions or trade with only one customer. Moreover, a business can insure against the chances that a customer will refuse to accept the goods that have been produced.
- Business interruption insurance- This form of business insurance will help to cover some of the income lost during an emergency till the business recovers. Typically, it will cover your continuing operating expenses, lost profits (based on previous financial statements), and the cost to set up a temporary location.
2. The Disaster Plan. Your business disaster plan is the established set of steps you and your employees must take in the event of an emergency. It should include a detailed (and up-to-date) breakdown of responsibilities as well as who will do them. There should also be included in the plan a system for protecting and mobilizing assets. Some steps and factors to include are: contacting your insurer(s), contacting vendors and suppliers, how you will maintain customer and, where applicable, investor relations, possible places for relocation, and knowing where to turn for financial assistance (see below).
3. Employee Safety- One of the most vital elements of your business disaster plan is planning for the physical safety of your employees. Aside from having worker’s compensation insurance mentioned above, and following good business practices as defined by the Occupational Health and Safety Administration, make sure that your business has an adequate supply of first aid kits and fire extinguishers. You should also find out if any of your employees are trained in CPR. If none are, then consider paying for training for one or more employees. Finally, you should maintain an up-to-date emergency contact form for each worker.
4. Data Backup- When it comes to business data protection the general rule is if losing a particular kind of data will interfere with the way you do business, then back it up. For most businesses this information includes: customer databases, payroll records, income and sales records, important emails, addresses, as well as to-do-lists and schedules. All of the files that you have created and modified should also be backed up on a regular basis.
There are several methods of data back up that are particularly suitable for smaller companies- especially where IT expertise is lacking and there is no in-house IT person. It is recommended that you use several of them simultaneously so that the redundancy can help to ensure that little if nothing is lost. The most popular, inexpensive, and easy-to-use options include: purchasing an external hard drive or USB flash drive, copying files on to a writable CD or DVD, using an online data backup and recovery service.
Regarding the last option, there are many services to choose from, such as SugarSync and Norton Online Backup. If your storage needs are small, then I highly recommend Dropbox. The service is free with 2GB of storage (to increase capacity it will cost you) and files are automatically uploaded and stored in the cloud.
5. Financial Assistance- Even with the best planning, recovering from a disaster typically requires a significant amount of money, and even if you have insurance, your policy may not cover all of your needs. Therefore, make sure that you are familiar with any federal or state loans that may be available to you. The Federal Emergency Management Agency (FEMA), provides various kinds of financial assistance to individuals and businesses effected by a disaster, and the SBA also supports a disaster loan program so you should start with these two options. Finally, there may be local industry groups that will offer financial aid.
In short, with a little preparation, you can help to contain the damage caused to your business by an unexpected disaster and put the right foot forward towards a smooth recovery.