Last week, the wildfires in Southern California received top billing on the news nationwide. While many people tragically lost their homes, there is no doubt that some also lost their business in the fires.

Many of us will never have to face out of control wildfires as a risk factor for the destruction of our business, but natural disasters of every kind span the nation. Anything from wildfires, to tornadoes, ice storms (which caused some devastation in my home town last winter), to hurricanes, there are a number of possibilities that can damage to your business. And you need to make sure you’re protected.

Insurance Coverage
First and foremost, be sure that your business (just like your life, health, home and vehicles) is insured. And, be sure that your business insurance covers disasters that are common to your area of the nation. If you live in the Midwest, be sure that tornado damage is covered. If you live on a coast, be sure that hurricane damage is covered, etc. Additionally, though wildfires tend to be more prevalent in the California area, fire damage can happen anywhere, so be sure, no matter where your business is located, that you’re covered if there is a fire.

Additionally, you may want to look into Business Interruption Insurance. According to the Insurance Information Institute, Business Interruption Insurance will cover your business income in the event that you can not do business due to a disaster, such as fire. The benefits you receive are based upon your business’ financial records and should also cover operating expenses, such as the electric bill. Be sure that your policy limits will cover you for an extended period of time, as it typically takes anywhere from a week to a couple months to get things up and running again.

Backup Everything Often
You should have a backup of everything you do with your business. Most businesses have a server, which you should backup weekly to an off-site location. If you do not have a server, backup your computer to disk and store those disks off-site. The off-site location is the key. If your backup is stored at your business and your business is destroyed, then the backup was useless. Best option is to purchase a safety deposit box somewhere. Every few weeks, verify your data backups are working properly and that the data is indeed recoverable.

Additionally, you should update your inventory at least annually. Part of this inventory should be a list of all of your assets (equipment, supplies, etc), including the model and serial numbers, purchase date, purchase price and pictures. You should take pictures of everything, including vehicles, the interior and exterior of your building, equipment, and even the cleaning supplies in the closet. The more thorough your documentation, the more likely you are to get reimbursed for everything you may have lost.

Gather Your Stuff
If you have warning about a disaster, such as an evacuation order for your town, the best thing to do is gather everything you can and take it with you as you retreat. This can be an arduous task if your business consists of a lot of files (such as a law firm), so it is best to leave those and, instead, take with you a client list including contact information, your computer(s), your server (if you have one on-site), financial records, and the like. The more you can take with you the better, with the understanding that you still have to take items from home with you as well, if the disaster may effect both locations.

Know What to Expect
If disaster does hit your business and you’re not running for awhile, you need to know what you expect and you try to get back on your feet. As I said before, the process can take awhile. It’s hard to rebuild a business in an area that has been hit by a natural disaster. Look at how long it has taken to rebuild and reestablish New Orleans. Customers have probably relocated, either temporarily or permanently. And employees will have to find work elsewhere in order to pay their own bills. Even if your business was destroyed by a contained fire, you will likely still lose customers and employees.

Also, from a tax perspective, you need to know that, if you do not replace your inventory and rebuild your business with the insurance benefits your receive (maybe this disaster gave you the opportunity you were looking for to do something else), then the government views those benefits as a taxable income for the sale of assets. However, if you do replace them, the benefits are not taxable.

The important thing to do when running a business, big or small, is to be prepared for anything. Don’t take any chances, be sure you’re insured and back-up everything on a regular basis in more than one location. You can never over protect yourself, but you can definitely be under the mark. Do what you can to prevent ever being in that situation.

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2 Responses to “Preparing Your Business for Impending Disaster”

1. David Staub says:
   

   Under “Backup Often”, I would add “test your backup.” We had a client who faithfully backed up its computer every night but never did a test on restoring the backup. When a disaster struck, the company went to the backup only to find that it the backup had been malfunctioning for months and that all of those carefully stored backups were useless.

   Posted November 4th, 2007 @ 9:46 pm
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2. Chris Brunner says:
   

   Thanks for the suggestion, I’ve added that in.

   Posted November 5th, 2007 @ 9:50 am
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