Small businesses can be hit hard when disasters strike. You can’t prevent many catastrophes, which can range from hurricanes, earthquakes and weather events to power outages, loss of key personnel, fires or theft. But you can have a plan in writing.
To develop a plan, think and talk through any emergencies you might be vulnerable to, such as a flood. Where would you relocate if your office building no longer functioned? How would you downsize your staff if you lost half your revenues?
"It's like writing a will," says Walt Mathieson, principal consultant at Mathieson Consulting LLC in Glendale, Ariz. "Get over any reluctance, and spend a reasonable [amount of] time preparing.”
Back Up Data
Back up your records and data offsite, somewhere well away from the office. "Keep a roster of past clients, since so much business is based on referrals," says Victoria Downing, president of Remodelers Advantage in Laurel, Md. "Some contractors have been in business a long time, and may perform 300 jobs a year."
Flash drives, CDs, DVDs and tapes are common backup tools, as well as cloud computing technologies. You should also invest in surge protectors, battery backup systems and emergency lighting in case the power goes out temporarily.
Set Aside Funds
You will need some liquidity if your business is interrupted. Downing recommends saving about three-months worth of overhead in cash, and establishing a line of credit. Approach your bank before you need it, while your balance sheet is strong.
Todd Allen Miller is a contractor based in Ventnor, N.J., a small barrier island sandbar at risk of flooding. He sets aside 10 percent of his annual revenues as rainy-day cash, and maintains an additional 10 percent no-cost line of credit. He also carries insurance policies — another essential — and has separate policies for fire, floods, wind damage, hardware equipment and data.
In any disaster, communication systems typically are affected. Contractors urgently need a plan for contacting subs and crews, because even cellphones may not work during a major power outage. Arrange a meeting place in advance.
In case something happens to you or your partners, a business succession plan or even some "key person" insurance would help. "You could be strapped if you have chosen to be the only signer on your bank account," Mathieson says. Leave duplicate office keys and alarm codes with someone you trust.
Hurricane Katrina and 9/11 had devastating impacts beyond their immediate vicinities, as consumer confidence plummeted and many businesses canceled projects. Keep in mind that your service providers, including your local bank, could be affected in a major crisis. The price of your materials could skyrocket. Include some language in your contract that protects you from consequences of natural disasters, such as the ability to terminate or renegotiate.
In the aftermath of a disaster, take stock of your situation, then decide whether to close or rebuild. You may be eligible for an SBA Disaster Loan or IRS tax relief to help you recover financially.
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