Disaster Happens, How to Protect Your Business

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Published May 18, 2012

| FOXBusiness

Disasters can strike at any time, which is why having a disaster recovery plan can mean the difference between a small business going under or staying afloat. Whether it’s a hurricane, tornado, earthquake, wild fire or any other natural or manmade disaster being prepared will enable you to get your business back up and running smoothly and quickly.

According to the Insurance Information Institute, 15% to 40% of businesses typically fail following a natural or manmade disaster, underscoring the importance of having a plan in place. Small businesses are even more vulnerable. The New York State Small Business Center estimates seven out of ten small businesses never recover from a disaster.

“Since small business owners are more vulnerable to being shut down for good in the aftermath of a disaster, and they don’t have the resources big firms have to recover and rebuild when a disaster strikes, we encourage anyone interested in staying in the game to develop a disaster preparedness plan,” says Carol Chastang, a spokeswoman for the U.S. Small Business Administration. “The plan should change and expand as the business grows, and should be tested periodically.”

Before creating a disaster recovery plan experts say to assess your risk, both internally and externally. That means looking at the types of emergencies that have happened in your area in the past, determining if you are near a flood plain and what type of disasters your building is  designed to handle. According to the SBA, if you assess the physical risks of your building early on you’ll have the time to make changes and upgrades to reduce storm, wind, water or earthquake damage.

After you’ve determined your potential risk, the next step is to come up with a list of critical business functions and to figure out how long you can withstand a halt in those functions. Will you be able to run your business for a few days, two weeks, and/or a month without your customer database or financial records? How about if you don’t have access to your computer or storage server? You’ll also need to make a list of key employees and how you would operate without them. For example, could you keep your computer systems running if your IT expert couldn’t make it to the office?

Also, establish relationships with backup vendors in the event your regular suppliers are also shut down due to the emergency.

“Place occasional orders with them so they will regard you as an active customer when you need them during an emergency,” says Chastang. Make sure all the contact information is written down and in a safe place outside of the office that is easily accessible. It’s a good idea to keep copies of the information in multiple locations, say experts.

It also pays to back up your computer data, including financial records, employee information and insurance information, and store it off-site in secure locations.  The SBA advises small businesses to make backing up the data part of a small business' regular routine. It also advises to test the backed-up data regularly, making sure it is indeed being stored.

When disaster strikes it is not the time to scramble to find employees’ phone numbers or figure out if and where the staff should work. A phone tree should be created ahead of time, as well as plans for an alternate work space. You’ll also want to let customers know when you are up and running again, which is where Facebook and Twitter may come in handy. Previous disasters have shown people turn to the Web to gather information, so having up-to-date information on  the Internet will help let customers know you are operating.

It also pays to take stock of your current insurance policy.  Check with your agent to make sure you have adequate coverage. When buying insurance, the SBA says to ask yourself how much you can afford to lose and have a clear idea of the value of your property.

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