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In spite of the many recent natural disasters that have affected business across the country – Sandy and Nemo chief among them – 74% of small business owners have not created a disaster recovery plan, according to a recent survey from Alibaba, Vendio and Auctiva.
The threat to small businesses is real, as the Red Cross reports that as many as 40% of small businesses do not reopen after a major natural disaster such as a flood, tornado or earthquake. But it’s not just big storms that are a threat to small business owners: Small Business Administration spokesperson Carol Chastang says that it’s often the smaller incidents – like pipes bursting or a fire in the building next door – that threaten the financial future and security of a small business.
FOXBusiness.com spoke to three emergency-preparedness experts about how to build an effective and affordable disaster plan for your business and came up with a 10-step plan.
No. 1: Analyze Your Risk
Scott Teel, marketing director for Agility Recovery, which provides disaster recovery solutions for businesses, says that the first step in preparing your business is to analyze your risk.
“If you’re located in the Gulf Coast or on the East Coast, take a look at how to prepare for hurricanes. In California? Fault lines are a major risk,” warns Teel.
By determining what sorts of natural disasters might affect your business, you’ll be able to figure out what steps you need to take in order to effectively prepare. At the same time, analyze your critical business functions, suggests Teel, so you can figure out what you need at the bare minimum to keep your business running during an emergency.
No. 2: Create a Crisis Communications Plan
Both Chastang and Teel stress the importance of creating a crisis communications plan, in order to keep employees, vendors and customers in the know during and after a disaster has struck.
Chastang suggests, “Create a list of people you do business with – including vendors and suppliers – as well as a list of phone numbers, cell numbers and email addresses of your employees. Phone trees are old-fashioned, but they work!” Teel recommends using text messages to communicate with employees, as texts use less bandwidth than phone calls, and cell phones will continually try to send texts through until they are successful.
A crisis communications plan should also include a plan for sending updates to customers. “Assign one person the task of spokesperson, and have them be responsible for updating customers on social media or via email. Lack of communication with customers during emergency situations can undermine a business’s recovery,” said Chastang.
No. 3: Back Up All Data
While most data is stored on computers, Chastang cautions small business owners to consider the types of files that may be solely on paper. For these files, make copies and store them in a secure offsite facility.
“After Hurricane Katrina, many business owners couldn’t prove ownership of their facilities,” says Chastang, “because those files had been destroyed.”
Annie Xu, General Manager of Alibaba US, suggests cloud technology for backing up digital data and files. “By saving data on the cloud rather than on local computers only, you can still access your business’s data in the event that you have to temporarily or permanently relocate,” she says.
No. 4: Document Your Business
“Keep accurate documentation of the furniture, equipment and technology that your business owns,” says Chastang. “Take good pictures, make copies and keep them in a secure site, which will help you collect insurance in the case of damage.”
No. 5: Help Your Employees
Teel urges small business owners to make suretheir employees have disaster plans of their own.
“Small business owners will often say that their employees are their greatest assets,” says Teel. “If your employees are impacted or underprepared at home – say a family member or even a pet is injured during a storm – then that employee will not be coming into work.” Teel recommends sites like FEMA.gov and Ready.gov, which have checklists that will help your employees safeguard their own homes against natural disasters.
No. 6: Develop a Supplier Contingency Plan
Teel and Chastang agree that small business owners need to develop relationships with back-up suppliers, if their businesses depend on vendors or suppliers.
“Many business owners rely on local vendors or contractors,” says Chastang. “Finding a supplier in another state, who may not be affected in the case of a more local disaster, will ensure that you can continue to operate your business.”
Teel recommends opening up a line of credit with these alternate vendors, or even placing the occasional order, so that they continue to see you as a valued customer. Additionally, Teel instructs small business owners to speak to all vendors about their disaster precautions, in order to understand how reliable they will be in the case of an emergency.
No. 7: Check Out Your Insurance Coverage
“After Sandy, many small business owners found out that their insurance policies didn’t cover flood damage,” says Chastang. Before a storm hits, take a look at your policy and see what is and is not covered, so you can get additional coverage if needed.
Chastang and Teel both recommend business interruption or revenue loss insurance, which will help provide your business with the capital it needs to pay overhead costs, utilities and bills in the event that you need to close shop for a period of time.
No. 8: Expect Power Outages
Teel says the biggest cause of business interruptions, regardless of the type of storm, is power outages. “Anything you can do to overcome power loss in the most efficient fashion is the best step to take,” he says.
Before a storm hits your area, speak to an electrician to understand your business’s power needs. If your power fails, and it is impossible for your business to relocate to a temporary location, consider purchasing a generator. While generators can be expensive, having a sense of your energy load will ensure that you don’t overspend on a more powerful generator than you really need.
If you do need a generator, Teel suggests obtaining added expense coverage, which is very inexpensive to buy and will help cover the costs of actually running the generator, which can cost as much as tens of thousands of dollars each day.
No. 9: Prepare Your Facilities
“If you do have a generator, make sure it has fuel; the same thing goes for any vehicles your company needs,” says Teel. You should also prepare for outages by putting laptop and cell phone chargers in an easy-to-access location, so you can charge in your car, if need be.
Chastang recommends elevating files or technology if your business is located in a flood zone. “In 2010, a plant in North Carolina was hit by a massive flood. While the facility was destroyed, the managers had elevated all IT equipment and storage, so they were able to continue functioning in a temporary location,” says Chastang.
If snow or ice will be an issue, Teel suggests keeping rock salt on hand, so as to create as safe an environment as possible for your employees and clients.
No. 10: Build an Emergency Kit
In addition to storing important files in the cloud or in an offsite facility, Teel recommends building a business emergency kit, in the same way you might stockpile canned goods and flashlights in your home.
“In your kit, keep corporate insurance policies, telephone numbers for key vendors, copies of your biggest contracts, passwords for software installation and licensing keys,” says Teel. “If you need to relocate to a temporary office and need to buy new software because you don’t have access to your installation passwords, it will be a major expense that could sink your business.”
Lastly, you should also keep cash in your business emergency kit, to pay for any incidentals or basic supplies that might be needed during an emergency.
“If there’s a loss of power, credit cards won’t work. Having cash on hand will enable you to keep critical functions running,” said Teel.