Creating a Disaster Recovery Plan Makes Good Business Sense

25% of businesses that close because of a natural disaster never reopen

It is a sobering fact that 25% of businesses that close because of a natural disaster never reopen. Small businesses can improve their chances of successful recovery by assessing their risks and developing a preparedness plan, and the U.S. Small Business Administration (SBA) can help. Following a declared disaster, the SBA assists in the rebuilding and economic recovery of a community by providing affordable, timely, direct loans to businesses of all sizes, nonprofits, homeowners and renters to cover uninsured losses.

Any disaster can have devastating effects on an entire community. One of this region’s most destructive disasters unfolded the night of Sept. 9, 2013, when over 10 inches of rain fell in a 24-hour period, devastating Boulder, Colo., and several other communities. Flash floods killed eight people and inflicted damage on nearly 20,000 homes and hundreds of small businesses.

Establishing a disaster recovery plan makes good business sense. Being prepared for any kind of emergency means you’ll rebound sooner with less impact to your financial capabilities. Now is the time to consult your insurance agent to determine whether your coverage is sufficient. Make sure you understand what’s covered by your policy and determine if you need flood insurance. Remember, many general policies do not cover flood damage. 

Check into business interruption insurance, which helps you cover operating expenses if you’re forced to temporarily close. Calculate the cost of business interruptions for a day, week, month or more. To the extent possible, set aside a cash reserve that will allow your company to function during the recovery phase.

Strategically develop professional relationships with alternate vendors just in case your primary supplier isn’t available. Place occasional orders with them so they’ll regard you as an active customer. Create a contact list for important business contractors and vendors you plan to use in an emergency. Keep this list with other documents in an easily accessible place at a protected off-site location.

Create a crisis communications plan so that your staff, customers, vendors, contractors — everyone you do business with—know what’s going on in the aftermath of a disaster. Establish an email alert system, keeping primary and secondary email addresses for your employees, vendors and customers. Provide real-time updates to your customers/clients and the community so they know you’re still in business and in the process of rebuilding after the disaster. Don’t forget to test your plan beforehand.

Dan Nordberg serves as the SBA’s Region VIII Administrator and is based in Denver. He oversees the agency’s programs and services in Colorado, Montana, Utah, North Dakota, South Dakota,and Wyoming.

Categories: Management & Leadership