Since starting their business 15 years ago, Donzelle and Cherryl Sharp had never before seen it hit so hard and in such a short period of time. Because of Hurricane Sandy, the Sharps' company, Precision Infrastructure Inc., experienced losses of about $250,000. Projects such as a professional administrative support contract went uncompleted because of power outages caused by flooding and downed trees. The Lakewood, New Jersey company was forced to close for nearly two weeks. Worse, because it couldn't finalize federal contracts that were in the proposal process when the super storm hit, PII Services suffered additional losses that exceeded $5 million. "For a smaller firm like ours, it was a substantial loss,†says Donzelle Sharp, president and CEO of the professional services consultancy specializing in program management, medical support, logistics engineering, and professional staffing services. Clients include the U.S. Department of Defense, U.S. Department of Veterans Affairs, U.S. Department of Justice, and U.S. Department of Homeland Security. The 75-plus employee firm generates annual revenues from $4 million to $8 million, depending on existing contracts. To rebound from Sandy, the firm did a cost analysis of the lost projects and is retargeting the lost business. PII Services is hoping to take full advantage of the federal dollars the Federal Emergency Management Agency has allotted to Restore the Shore, a relief effort to help homeowners and small businesses located on the Jersey Shore that were damaged by Sandy. The company did not have flood or utility interruption insurance to cover the work stoppage, but Sharp is now exploring purchasing such coverage. He notes, however, that his business sustained damage from wind and rain, not flooding. Experts say the speed with which a business owner responds to a disaster can determine if a business survives or fails. Gail Moraton, business resiliency manager at the Insurance Institute for Business & Home Safety in Tampa, Florida, says that one out of four small businesses is forced to permanently close following a disaster. But having a business continuity plan can help small business owners keep their doors open following a business interruption. A survey conducted for Agility Recovery Solutions indicates that smaller companies, those with 100 employees or less, spend less than one day per month preparing and maintaining continuity plans; one in five spend no time at all. Yet, a disaster preparedness and business contingency plan doesn't have to be overly complicated, and having a viable plan will better prepare employees and management. Contingency planning is basically the identification of all critical procedures and resources necessary for the survival of the business. Small Business Association spokeswoman Carol Chastang says that given the current economic climate, "small businesses are particularly vulnerable to economic loss after a disaster, because they don't have the financial assets that big companies do. Larger organizations often have staff dedicated to managing business continuity and emergency planning.†Insurance for Your Business Having the proper business insurance coverage is also critical to business recovery. When Hurricane Katrina ransacked the Gulf Coast, Arnold Baker's concrete and construction company got wiped out. The disaster caused Baker Ready Mix & Building Materials to lose more than $6 million in projected revenue for the six months following the 2005 storm. In addition to damaging his plant, buildings, and infrastructure, Katrina also caused the loss of more than $1 million by damaging five concrete mixer trucks, equipment, and parts. "Those initial weeks following Katrina seemed like a Mad Max movie after the big war,†says Baker, BRMB's owner and CEO. Unfortunately, Baker, 46, learned the hard way that his insurance was inadequate. "Since I was underinsured [liability coverage for book value, not replacement value], my insurance carrier only gave me $600,000 less a $50,000 deductible for all the trucks.†New trucks cost $160,000 to $180,000 apiece. Facing a 30% rate hike from his previous insurer following the disaster, Baker selected the Cayemitte Group in Bordentown, New Jersey, as his company's new insurer. The Cayemitte Group showed Baker that, had he been properly insured for casualty, business interruption, and the appropriate risks, he could have been reimbursed for at least $1 million in disaster-related damage. Baker has since purchased a business owners insurance policy that includes business interruption coverage, also known as business income insurance. Such a policy pays income to a small business in the event of a covered disaster that prevents the company from operating normally, but not if a business is shut down because of flooding or the loss of power. Flood insurance can be purchased from the National Flood Insurance Program run by the federal government. Business owners should also explore optional add-on coverage to their property insurance that specifically addresses power outages or utility services interruptions. "The losses that could occur from being under- or improperly insured can far exceed any gains you make from running a profitable businesses,†says Baker, who was forced to bring on investors to help grow the company and cover the cost of repairing the damage. He has since bought out those investors. BRMB is back in business: With 60 employees and 40 concrete mixers, the company generates annual revenues of more than $10 million. Chuck Miccolis, a commercial lines engineer at Institute for Business & Home Safety, says most business owners don't fully understand the specific risks they're exposed to at their location, and even if they do, they often underestimate it. Business owners can go to www.disastersafety.org to use a tool, Risks in Your Zip Code, that describes risks by location, sheltering business and property, and other vital data. Another property protection and recovery planning tool IBHS offers small to mid-sized businesses advises business owners about mitigating property loss, preventing data loss, and lining up backup suppliers. Be Prepared An important factor in your business assessment is whether you own or lease. You should know how much it would cost your company to shut down for one week, one month, and six weeks. Also, build up a cash reserve that will allow the business to function after a disaster. Carol Chastang of the SBA offers these tips as well: Determine your greatest risk potential. It could be wind damage or inland flooding that typically follows a tropical storm's heavy rains. Financial losses could result from road closings after a hurricane. All businesses are vulnerable to costly losses when a power outage occurs, so having a plan for when you lose power is a good idea. Look at the building–inside and out–where you do business, and assess the disaster risks. Done early enough, an assessment allows you time to do structural upgrades, such as installing impact-resistant doors and windows, that could prevent or minimize storm damage. Ask about insurance coverage. Is your policy adequate in light of your risk? What is and is not covered, such as business interruption income? Most property insurance policies do not cover flooding, yet apart from drought, floods are the leading cause of natural disaster losses in the U.S., according to the U.S. Geological Survey. At FloodSmart.gov you can learn how to buy a flood policy, what is and isn't covered, and how rates are determined. Make sure you back up your data. Store your financial records, tax documents, and other vital records off-site. Find an alternative location. Depending on your finances, consider an alternative site where you can relocate your company if a disaster forces you to close your main location indefinitely. Kevin Kerridge, director for small business insurance at Hiscox, a Bermuda-based specialty insurer, suggests entrepreneurs consider purchasing business owners insurance for several reasons, including if they have computers, printers, and furniture, as well as if they own and regularly work with large amounts of data. Kathy Bromage, senior vice president of strategy for small commercial insurance at The Hartford, a Hartford, Connecticut-based insurance company, adds "it's important to work with a qualified independent insurance agent who will take the time to understand the unique needs of your business and help ensure that a specific policy meets those needs.†Buying Business Insurance Entrepreneurs running a business should be prepared to cope with unexpected losses. Insurance policies cover just about every risk a small business could face including that of property damage, disasters, theft, vandalism, and other sudden events. Commercial insurance, also known as business insurance, can help protect businesses from the losses that often result from such misfortunes. Here's what you need to know about the various policies: Business Owners Insurance is one convenient package that comprises liability insurance, business equipment, and personal contents, and may also include coverage for buildings and vehicles. Additional protection may include crime insurance, which covers the loss of money or securities resulting from burglaries or hazards as well as losses from employee theft or embezzlement; and business interruption insurance, which covers losses that result from having to suspend operations or reduce production for a time. This coverage provides compensation to offset lost profits or to pay continuing expenses such as rent and payroll, typically for up to a year for insured losses. Not only does business owners insurance cover losses in case of fires, hurricanes, and break-ins, it also covers lawsuits. Commercial Property Insurance covers a company's physical assets including buildings, equipment, inventory, computers, and records damaged by an insured cause of loss. Property policies typically do not cover loss or damage due to floods. Flood insurance is sold separately; visit the National Flood Insurance Program at FloodSmart.gov. Data Breach Insurance addresses the loss and theft of sensitive customer or employee data, a growing risk for small businesses because of the increasing popularity of mobile devices and the greater sophistication of hackers. General Liability Insurance protects you against claims of bodily injury or property damage by someone at the business. This is important coverage if you or your employees visit off-site locations, like training, conference, or event spaces. Even home-based businesses need liability insurance. Professional Liability Insurance protects you against disgruntled clients filing suits that claim negligence, errors, or omission on your part while you performed your services.