Hopefully, no business owner in the U.S. will ever have to face the triple catastrophe experienced recently by many in Japan.  However, a flood, a fire, or even a sustained power outage can devastate your business.

Create a disaster plan
Think about what you’ll do if a disaster strikes in your area. If you fail to give this problem thought, you could wind up closing your doors forever. The American Red Cross estimates that 40% of small businesses never re-open after a disaster.

There are three stages in your disaster plan to think about:

  1. Stage 1: What will happen during the disaster event (e.g., evacuation; remaining in place)?
  2. Stage 2: What will happen during the period from disaster through recovery (e.g., operate from an alternative location; telework)?
  3. Stage 3: How will you restore your facilities and get back to business as usual (e.g., rebuilding; contacting customers)?

Communicate your plans to your staff so they’ll know what to do in case of an emergency situation. Create a communications method for conveying emergency instructions. This can be via telephone or on your website.

Resources to help in creating a disaster plan for your small business include:

Check insurance coverage
Make sure that the coverage you have is sufficient to see you through a catastrophe. Your basic BOP (business owner’s policy) may not address all your needs. Some occurrences may not be covered in the policy; review your policy with an agent to determine your exposure in case of catastrophe. Check for coverage for floods, riots, and terrorist attacks and obtain this coverage if desired.

Also, consider business continuation coverage. This coverage, which can be added to your BOP or purchased as a separate policy, is designed specifically for disasters; it provides funds to pay your ongoing expenses even if a disaster shuts you down. It may also provide funds to operate in an alternate location until repairs have been made. And it may replace your lost income.

Learn about business continuation coverage from Insure U for Small Business.

Back up data
Undoubtedly you know the importance of backing up your data. Once it’s lost, it is difficult (costly) or impossible to recover.

Back up to offsite servers or use a backup service, such as Carbonite. The service automates the backup process; my data is backed up each night without any special direction on my part. The cost of the service is modest.

Maintain an inventory list
What do you have in your space? Keep an up-to-date list so that you can make appropriate insurance claims and replace what is lost in case of a disaster.

The Insurance Information Institute offers software for this purpose; it’s $9.95/month.

Expand your list of suppliers
You may not experience any disaster, but your supplier might; this can leave you without the items you need. Explore your supplier options and, at a minimum, create a list that you can work if and when the need arises.

Bottom line
Like Boy Scouts everywhere, be prepared!