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June 24, 2018

Small Business Advice

Prepare your business for disaster

"The future belongs to those who prepare for it." ~ Jim Moran

Jerry Osteryoung | 7/9/2012

As we move deeper into hurricane season in Florida, we are reminded how important it is for every business to have a disaster plan, regardless of their location and whether it is in preparation for a hurricane or some other sort of emergency. A disaster will never be easy to deal with, but the more you plan ahead, the less disruption your business will suffer.

The first step in creating a disaster plan is to determine your greatest exposure. This might be the lack of electricity, financial problems because you are unable to make sales, the inability to get employees to the workplace, the inability of your vendors to deliver products or services, or the loss of access to your data.

Jerry Osteryoung
Jerry Osteryoung

Most businesses will find that in a disaster, multiple issues will impact their ability to resume operations. For instance, an electricity outage combined with difficulties in getting staff to the workplace may cripple a business.

Whatever these critical issues are for your business, you need to develop a plan that allows you to deal with them. For example, in the event that a lack of electricity is a big problem, having a generator installed is worth considering. This is expensive, but think about the cost if your business is incapacitated. Your customers will not tolerate you being down for any length of time because your inability to deliver will cause their business to suffer.

Another very common problem I have seen businesses face after disasters is the inability to access data or computer systems. This can happen either because of an electricity outage or because the technology is destroyed. To avoid finding yourself in a situation you are unable to recover from, you should make sure you have redundant data stored far away from your primary operations.

After you have identified and dealt with your exposures, the second step is to estimate what the downtime will cost. You should have a cash reserve built up for this, establish a line of credit at a financial institution or purchase business interruption insurance. The point is, being out of business is going to be expensive and you need to make sure that you have adequate reserves of cash to pull from in an emergency.

In addition to looking into the possibility of adding business interruption insurance, you should be familiar with what your existing policies will cover in a disaster and adjust them as necessary. Flooding is the most common cause of disaster and so many insurance policies just do not cover this type of loss.

The final step in planning for a disaster is developing a communication plan for your employees and customers. How are you going to communicate with your employees and how are they to communicate with you if you are without power and phone service? Make sure you collect secondary email addresses for your staff and vendors so you can continue communicating with them.

From a business point of view, how well you survive a disaster hinges on your ability to communicate. We all know communications are at the heart of every business, every single day, but during a disaster, they become even more critical. Your plan should be well thought out and easily put into practice.

Now go out and make sure that you have a viable disaster plan in place that addresses the steps and work-arounds you will need to cope in the event of an emergency. The Small Business Administration provides a wealth of helpful resources on their website, here.

You can do this!

Go to Links Other small business advice columns from Dr. Osteryoung are here. Note: Articles older than 30 days require registration (it's quick and free).

Jerry Osteryoung is a consultant to businesses - he has directly assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is an bestseller. He can be reached by e-mail at

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