Updated: Sep 27
We’ve seen our fair share of disasters lately: fires, hurricanes, pandemics, tornadoes, earthquakes, winter storms, and floods. They come out of nowhere and flatten businesses in their wake.
Planning for disaster has been considered the route of the paranoid. Clearly, it’s not. Even Forbes warns, “It could take weeks, months, and potentially even years for a small business to get back up and running again after a natural disaster.” Constructively planning for the worst-case scenario isn’t a bad thing. In fact, it may be the thing that saves your business.
We’ve come up with six steps to guide you when creating your worst-case scenario plan. Develop it now and then you can put it aside and focus on growing your business and enjoying the benefits.
1. What Is Your Worst-case Scenario?
Each business has a different set of risks attached to it. If you have a physical location, flood or fire could destroy your property. If you depend on refrigeration or the internet to do business, a winter storm and subsequent loss of power could destroy you. Sit down and develop all the worst-case scenarios that would affect your business.
Then, come up with ways to mitigate these risks. Do you need to up your property losses coverage? Should you have an automatic standby generator? Are all of your transactions backed up to a server outside your area and are you able to access them remotely through the cloud?
Coming up with a plan specifically designed to address your business’s circumstances can give you a sense of comfort, knowing you’ve done all that you can do to protect your asset.
2. Get Covered
Meet with an insurance advisor and go over your needs in relation to your coverage. Do you need more coverage due to the specific dangers in your area? Are there sublimits you should know about?
As a basis, included in your business insurance should be general liability, property loss, worker’s compensation, business interruption, and professional liability insurance. Make sure that if you have a physical space that could be destroyed, you have property damage dollar limits that will cover the cost of repairs or rebuilding the property. And get covered for the specific disasters that threaten your area (fire, flood, tornado, hail, etc.).
Once all of this has been set up, keep copies of your documents, and who to call in case they are needed, in multiple locations (both physical and digital). At the time of any damage or loss, record it using video and pictures whenever possible, and promptly contact the insurance company.
3. Safeguard Your Data
All important paperwork should have a hardcopy stored offsite, as well as a digital copy in the cloud. If you need to be able to access your information at all times, ensure that your offsite server is in another city or state from you.
Data that should be safeguarded includes:
Insurance claims, policies, and contact information
Deeds and/or rental agreements
Customer/vendor contracts and contact information
Employee and emergency contact information
4. Add A Clause To The Contract
Consider your agreements with customers and vendors, do you need an addendum to your contracts that addresses your liability in case of difficulties stemming from a disaster? If there is a danger that you will not be able to fulfill your contractual duties because of an interruption in business, it needs to be resolved in your agreements.
You can discuss this with your clients and associates to come to a mutually beneficial deal. Or develop a standard addendum that applies to any and all situations.
5. Start A Disaster Fund
Be prepared for the worst. Give yourself a cushion to take care of your employees and float your business expenses for as long as possible. In the event of a disaster that ends up closing your doors, you’ll want to try and retain your staff and clientele for when you are able to reopen. Of course, you cannot predict how long this will take. Consider stoking your Disaster Fund to last at least a month and up to a year.
6. Create An Emergency Operations Plan
If the worst were to happen, what would you do? You and your employees will breathe easier if they have an Emergency Operations Plan ready to go.
Elements of this plan could include:
Who is in charge? What is each member of your company’s responsibilities, whether on- or off-site, in the case that there is a disaster?
Do you need a data backup protocol?
If your physical space is in danger, what is the evacuation plan? Where are the emergency kits? Do you have a Shelter In Place space, Tornado Shelter, and the like, designated?
Are you set up to work from home or do you have a secondary location to conduct business from?
How will you communicate, within the company, to ensure everyone’s safety? What is your backup if email, text, or call are down? Do you have a designated gathering place in case of evacuation?
Do you have a generator to continue business in the event of a power outage?
What is your plan to communicate with your customers, vendors, and the general public? You’ll need to inform them of any changes in hours, closures, product availability, etc. Will you use email, social media, press releases, newsletters, etc.?
Once your plan is complete, make sure that every team member knows the details, their role, and how to execute it.
After the Fact
If the worst comes to be, know that there are resources to help you recover. U.S. Small Business Administration gives out low-interest loans to small businesses affected by a disaster, and FEMA offers free legal help with insurance claims and other issues. It’s recommended to rebuild quickly, while sympathies and aid are still available. And make sure to reach out to and collaborate with other businesses around you!
How Can We Help?
We hope that disaster does not ever hit your company, but preparedness is key. Safeguard your beloved business from the unforeseen disasters that can ravage it by creating your worst-case scenario, making sure you’re covered, protecting your data, clarifying your contracts, starting a Disaster Fund, and creating an Emergency Operations Plan.
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