Planning for Small and Home Businesses
by Janet Attard
What would you do if a catastrophe struck your business? While terrorist attacks are something we hope we never see in the US again, there are any other number of relatively "common" disasters such as hurricanes, tornadoes, flooding rivers, fires and even earthquakes that can potentially disrupt your small business.
While you might not be able to prevent the disaster, you can take steps in advance to minimize your potential for loss from catastrophic events. Here are some guidelines:
Be sure you have adequate
The obvious losses you might suffer in a disaster (damage to buildings, equipment, etc.) aren't the only possible risks you face. Rent, loans, equipment leases and other expenses will have to be paid whether your business is operating or not. Furthermore, you could be held responsible for damage to any property held on your site for others (for instance, clothing if you are a dry cleaner; computers if you repair computers.)
If your business is home-based, don't assume your homeowners' insurance policy will cover business casualty losses. The most that the average homeowners policy will pay towards the loss of business equipment if your home office is destroyed is about $2500. Chances are that amount wouldn't begin to cover your losses. A standard homeowners policy won't offer any business interruption coverage, either. (Business interruption coverage helps cover income that is lost while your business in unable to operate. It helps you continue to pay ongoing expenses such as loans and leases.)
You can solve the problem, and protect yourself against casualty losses in one of two ways. First, ask the provider of your homeowners (or apartment dwellers) insurance if there are endorsements available to cover you against casualty losses for an office in the home. Such endorsements are add-ons to your homeowners, and can be a relatively low-cost way to get coverage. Typically such endorsements cover up to $10,000 in business equipment in the home office, and may provide some business interruption protection. Sometimes you need more than one endorsement to be sure that your computer equipment is covered. (If you travel with a notebook computer, or have any other equipment that you take with you when you travel, be sure your coverage specifically applies to loss while you are traveling. Such coverage may not be a routine part of your policy.)
If an endorsement to your home office policy is unavailable or if it doesn't offer you enough protection, you'll need to purchase a separate business owner's policy. Many companies will now issue business owner policies for offices in the home. Expect to pay several hundred dollars for this type of coverage, though.
Read the small print
The "small print" isn't small any more. But even so, it's unlikely that a quick glance at the front page of your policy will tell you exactly what you are. Pay particular attention to what risks are excluded. Even if you have a business owners' policy, you may find that employee theft, machinery breakdowns or other perils are not covered. If you are located in a flood area, you will probably need to get a separate flood insurance policy, too. Information about flood insurance is available from the Federal Emergency Management Agency (http://www.fema.gov/nfip/). Pay careful attention to whether or not your computer equipment, software and computer data are covered, too. Those may need to be covered under a separate policy. If there is anything that isn't clear, ask your agent or broker to get you a clear explanation.
Look to be sure your policy includes business interruption insurance and insurance for extra expenses. (Extra expenses would be costs over and above your normal operating costs that you need to spend to keep the business going during restoration.)
Develop a Disaster Recovery Plan
The specifics of such a plan will depend to some extent on the nature of your business, but here are some areas you'll want to address.
Know Your Achilles' Heel
Actually you will have several of them. Determine what types of losses would be most damaging overall to your operation. Would your business go down the tubes if your accounts receivables files were destroyed? What about your customer list, contact list, or all the procedures you've developed for your independent testing laboratory? How long would it take you to get back in business if they were destroyed? Once you identify these critical operations, write an emergency recovery plan that details the priority order in which your operations should be restored and where the resources to restore each business function can be found.
Computer Data and Vital
Most businesses never stop to realize how much their ongoing business depends on documents, forms, programs, employee records, customer correspondence, contact lists, and accounting information that has been developed or collected over the years they have been in business. And sadly, many businesses that lose such critical data in a disaster are never able to reopen their doors.
To protect yourself from that fate, take the time to make duplicates of all of your company's vital records, computer data, video tapes, customer lists, accounting data other documents or media that are essential to your business operations. Store these duplicates off-site in warehouses or other facilities specially constructed for data and record storage. Look for a facility that is located in a different town from yours, too.
If you just have a small amount of records or data to store, put them in a bank safe deposit box, or if there are no other options available to you, store them at a relative or associate's office in a distant location. Be sure to update the backups regularly, too. All the backups in the world won't do you any good if they are a year old, or if they are stored in your office and your office building burns down.
Don't forget about your web site, either. Be sure you have current backups of that even if your host site claims to make daily backups. One large hosting company in NY recently had a hard disk crash, and despite claims of daily backups, were unable to restore the data from mailing lists they operated for their customers. The reason: their backups were too old. Any of their customers who had not captured the names from the mailing list program and stored them on their own computer systems were out of luck. The names were gone.
business facilities that could be used in a pinch
It can takes weeks or months to restore a facility after a disaster. While your customers may be sympathetic to your situation, if you can't handle their needs, they will have to look elsewhere to for someone to serve them. To avoid losing market share to your competitors, consider what alternate facilities you might use to operate if a disaster should hit your business. Among these alternate facilities that will rent office or warehouse space for short terms, friend or neighbors with a spare room or spare office, or even your employees homes if your business is one that would lend itself to telecommuting.
Make an emergency contact
Your contact list should include state, local and federal emergency phone numbers; phone numbers, addresses and email addresses if available for major clients, suppliers, contractors, financial institutions, insurance agents, radio and newspapers, and any other individuals or businesses you might need to notify if there was a disaster. You should also have complete contact information for your employees and corporate officers. Keep the contact list stored offsite so it is available in case of disaster.
Be sure your employees have emergency contact information for your business, too. This should be some offsite location they can call to get information in the event of a disaster.
Inventory your equipment,
software, and library
Keep the make, model number, serial number and purchase price. You'll need the information for the insurance company and for the IRS.
Keep notebook computer
batteries and cellular phone batteries charged
Notebook computers and cellular phone connections can help you stay in touch with associates during some disasters. Often phone services (and cellular) is restored before electricity. Keep one copy of your contact list on your notebook computer so that you can pick it up and carry it out of the building if you are onsite when an emergency occurs.
Develop a set of simple
procedures to follow during a disaster
Be sure each of your employees know when an emergency strikes. should take if a disaster occurs. Consider things such as crucial valves that need to be turned off to prevent explosion, backup power supplies, location of first-aid supplies, and methods for communicating instructions to employees and/or customers while an emergency is in progress.
Keep the emergency plan simple, but be sure it lists the critical steps that need to be taken and by whom. Identify escape routes and make sure everyone knows where they are. Designate a check-in point or meeting place that all employees should go to if there is an emergency such as a roof cave-in that only effects your facility. Having such a check-in point makes it easier to determine if anyone is unaccounted for.[http://www.businessknowhow.com/includes/aboutjanet.htm]
Article Submission Guidelines
The information compiled on this site is
Copyright 1999-2001 by Attard Communications,
and by the individual authors.
MLM Know-How is a service mark of Attard Communications, Inc. Business Know-How is a registered trademark of Attard Communications, Inc.