Staring Down Disaster

For Dayton, Ohio-based Comtactics L.L.C., 2008 was turning out to be a banner year. The five-year-old marketing and Internet solutions firm, which develops Websites, logos, and videos, finished 2008 with $540,000 in sales and in December moved into a larger, newly renovated office.

“We had spent several days painting and putting up wallpaper,” recalls CEO Sean Fields, who co-owns the company with his wife. “Two days later I walked into our office and standing water and ceiling leaks were everywhere.” Burst water pipes flooded several floors, including Comtactics’ office; about $75,000 worth of computers and digital equipment were destroyed. As of February, the building was still shut down until further notice. While the company was displaced (Comtactics recently relocated to downtown Dayton) for about two months, Fields, 38, and seven employees ran the business from their homes. “We are now challenged with providing documents to the insurance company and relocating, all while meeting project deadlines,” says Fields.

No matter how much forecasting business owners do, they can never predict exactly when or how a disaster will strike. Technology provider Hewlett-Packard and SCORE: Counselors to America’s Small Business, a Washington, D.C.-based organization that advises entrepreneurs, teamed up to compile research showing the impact of disasters on small businesses. Among the findings: 43% of businesses that experience a disaster without an emergency plan in place never re-open.

“A business disaster is that point in time when you cannot provide your customers and clients with the minimum level of goods and services they need

and expect,” says Diana L. McClure, business resiliency program manager for the Institute for Business and Home Safety in Tampa, Florida. This 501 (c) (3) organization is supported by the property/casualty insurance industry and promotes disaster preparedness among small and mid-sized business owners.

Mother Nature–which can bring destruction in the form of hurricanes, tornadoes, and floods–isn’t the only threat. Common man-made disasters include fire, data loss, and robbery, experts say. And small businesses are particularly vulnerable because they’re less likely to have large cash reserves to handle a crisis, or risk managers on staff to anticipate one, says Laurence Barton, author of Crisis Leadership Now: A Real-World Guide to Preparing for Threats, Disaster, Sabotage, and Scandal (McGraw-Hill; $39.95). But disasters don’t have to be devastating. The following steps can help business owners prepare.

ASSESSING THE RISK
At the heart of disaster preparedness is a business continuity plan, a strategy for operating in an emergency situation. Creating one makes good business sense, says McClure, since customers may flock to a competitor if a business’ operations are disrupted. A business continuity plan can boost the bottom line, Barton adds, particularly if a business owner sells his company, because “a business valuation will be higher if you’ve never had a major disaster disruption.”

To gauge the vulnerabilities specific to your business, take the following steps:
Identify industry-specific risks. Research businesses like yours that have experienced calamity, such as earthquakes, fires, or robberies, Barton suggests. Learn what these businesses did and didn’t do as well as what worked and what didn’t so you can include proven strategies within your own company’s plan.

Check insurance policies. Without adequate insurance, a business can be forced to close. That’s what happened to Angelique Moss-Greer’s Clarksville, Tennessee-based herb shop Natural Choices Botanica when it was destroyed by a tornado in 1999. When submitting a claim for the damage, Moss-Greer, now 39, learned that her policy did not include coverage for wind damage, costing her tens of thousands of dollars. “I lost everything,” recalls Moss-Greer, who had pumped more than $100,000 in savings into her business over the previous seven years.

To avoid such devastation, Randy Screen, chief insurance marketing executive officer for Winston-Salem, North Carolina-based insurance provider BB&T Insurance Services, recommends checking in annually with an insurance broker and asking, “What am I not covered for?” Coverage for some losses such as those due to wind, earthquakes, and crime may be excluded from standard policies. Consider acquiring business interruption insurance since it replaces lost income while a business is shut down; and be sure to keep an updated inventory including pictures of office equipment on hand, in case you need to file a claim later.

Prioritize processes. Identify the core functions that keep your business running, such as servicing current customers. That’s what your plan will focus on, says McClure. In the event of a disaster, all other tasks can wait.

CREATING THE PLAN
With a thorough risk assessment, a business owner can start thinking of alternative ways of working. After Fields

got over the initial shock of seeing his office flooded, he knew he still had Websites to build. And he was prepared. He had already replicated the company’s computer systems on his laptop, so he was able to set up shop at home. Though he needed to travel to visit clients or meet them at coffee shops, “We were still able to invoice everybody, and we were still able to get projects out,” Fields says.

To make sure your business can keep running during a crisis, think proactively:
Find an alternative location. If your business can’t be run remotely or virtually, identify a backup location to operate from temporarily or make agreements with a similar business to use their facility or equipment in an emergency, McClure says.

Create a data backup system. Not only should you keep copies of insurance policies and property records in a safe place, but make copies of employee contact information, vendor contracts, and customer data to store in a separate location as well. The same rules apply for electronic data. “A small business owner might decide to back up his critical data on a disc or USB flash drive or external hard drive, but if he keeps it on the same desk that the computer is on and the building burns down, the backup does him no good,” notes McClure. All of Comtactics’ data and sensitive materials were backed up on a remote server that executed a 72-hour automated sync process.

Also, create a manual with all

computer passwords and software product keys and store it in a separate, safe location. “The first thing you need to do when the server crashes is assess the damage and cause, and try to ‘rebuild’ the server with software tools and the operating system,” says Marcus Simpson, vice president of marketing and information technology consultant for Lexington, Kentucky-based Technology Consulting Group America. “After the rebuild, the backup data can be restored back to the drive.”

Get everyone involved. Let employees know where to report or whom to call in an emergency. By sharing details of the plan, you create buy-in and employee loyalty, says Becky Marquis, deputy director of the U.S. Department of Homeland Security’s Ready Business Campaign, which helps business owners minimize the effects of a disaster through planning. Go to www.Ready.gov and click on Ready Business for lots of helpful planning resources.

Talk to suppliers. If you depend on certain suppliers, have a backup on hand in the event business is disrupted because of an emergency. Also, speak with your suppliers beforehand about how they would get products to you if you ever needed to relocate quickly, Screen suggests.

While no one likes to imagine the worst, “the key to getting through a disaster is thinking of every kind of risk that could hurt your company,” says Barton. He adds that doing so won’t make you pessimistic. “It will make you a very smart business owner.”

This story originally appeared in the 2009 issue of Black Enterprise magazine.