Disaster Plans Can Save Small Businesses Hard Knocks (Bottom Line)

The majority of successful small businesses have one thing in common: a solid business plan. Without one, the chances of making it decrease significantly.

But many successful business owners don’t make a plan for dealing with disaster. Unforeseen events knock down even the best businesses once in a while. A good disaster plan can make the difference between getting back up again or staying down for the count.

The United States Small Business Administration offers an abundance of information for creating a disaster plan, much of it available on the SBA Web site.

Business owners should be prepared to relocate. A major disaster such as the tornados that ripped through the north central part of the state can force business owners to find a new or temporary location.

Keep copies of important documents at a location other than the business. Store these items in a fireproof safe if possible.

Communication is key before, during and after a disaster. Make sure all employees know what to do in case of an emergency. This might require appointing one person to act as the emergency contact, functioning as the liaison for all employees.

Also make sure employees know the evacuation route and safe places to gather within the building.

Communication with those outside the circle of business owners and employees is also important, according to the SBA Web site.

“Key employees can be assigned as spokespersons who will contact suppliers, creditors, other employees, customers, media and utility companies to get the word out that the business is still viable. Also, that spokesperson can keep the public informed of rebuilding efforts, if necessary,” according to the site.

The SBA also offers financial assistance to small business owners in the form of low-interest disaster loans. Interest rates could be as low as 4 percent.

SBA disaster loans were recently made available to residents and business owners in Baxter, Conway, Izard, Pope, Randolph, Sharp, Stone and Van Buren counties.

Interruption Insurance Can Save Businesses

Besides just insuring the physical elements of a business, such as the building, equipment and products, business owners should consider the less obvious, non-material expenses a disaster can cause.

“A lot of people just insure their property,” said Kenneth Galloway, a senior vice president with Walker Brothers Insurance in Springdale. “But in a major disaster it’s a real problem if they don’t have business interruption insurance.”

Business interruption insurance can provide a vital infusion of cash while a business gets through the difficult down time.

“Thirty percent of small businesses close after a disaster and that’s probably why. They’ve got money to replace the property, but they’ve lost business.”

Another area small business owners might overlook when considering disaster insurance is ordinance and law coverage.

If a tornado or hurricane caused a business to sustain damage to 50 percent of the building, standard coverage would pay for the repairs.

But some cities have laws mandating that if a building is damaged to a certain extent, it must be torn down. If the owner only had standard coverage, there is a good chance the insurance would only pay the amount it would cost to make the repairs.

Ordinance and law insurance can bridge that gap and pay the policyholder for the amount it would cost to rebuild.

“The main thing is, all business owners need a disaster plan,” Galloway said. “That’s really important.”