When disaster strikes is your small business ready? Unfortunately the answer is that disaster can strike at any time and it is often an unplanned event. All businesses need a business continuity strategy, unfortunately most businesses do not even know what a business continuity plan is.
I was talking to a small business owner last week and asked her if she had a business continuity plan. Her answer was, “no, I don’t need one – I’m not planning on retiring for another 10 years”.
What I meant by business continuity plan wasn’t a succession plan or an exit strategy plan but rather a plan for your business to continue operations in the face of disaster striking.
Why does your business need a business continuity strategy? Because typically disasters don’t announce that they are coming and that means that your business would likely not be ready for disaster.
What type of disasters can affect businesses: fire, flood, earthquake, hurricane, tornado, tsunami, terrorism, and more. Unfortunately the list is long.
Note: if you are a one-person business you will need a condensed version of the outline below. Have a shorter to-do and to-keep list. Keep a copy of your business continuity plan in a safety deposit box (across town if possible), or with someone you trust who is reachable in case of emergency but not your next door neighbor (since the disaster may strike both of you at the same time).
If you run a small business with more than 15 employees you may wish to have a plan for each department (e.g. administration/finance; sales/marketing; operations/human resources, etc.); and have each department head responsible for their department’s plan. However the plan needs to be integrated into a master document that you, as the small business owner, need to manage and control.
Your plan must consider how you will manage the impact of a disaster on your business. Will your employees be able to get to your place of business? Will your business be operational? How will you contact your customers and suppliers; or how will they contact you? Do you have your business records on a management information system that is backed up daily and stored offsite (way offsite – some business owners store this data in cities across the country: downloaded backups are transferred by script to professional backup services).
What your business continuity plan needs to include:
- A Communication Plan: How will you communicate and who will you communicate to? Your contact lists need to include all key stakeholders: employees, customers, suppliers, your insurance agent, your lawyer, your accountant, your software provider, your banker, your property manager or landlord if the building is not owned, shareholders, and others important to your business.
- Consider using your website to get messages out to stakeholders. When you start phoning staff, suppliers, customers, tell them that you will be posting updated information on the company website (if you don’t have one, set up at least a one-page site as a place holder). Ensure that you have a website host who can do the updates to your site for you – you will be busy elsewhere. This will save you and your people time in getting the message out.
- Adequate Insurance Coverage: Ensure that you have business income interruption policy coverage: you want to be covered in both upstream or downstream loss scenarios. Upstream could be the interruption you would incur if one or a number of your suppliers was affected by the disaster and could not deliver necessary supplies. Downstream could be the loss you incur when a key customer is affected by the disaster and stops ordering your product or service. Ensure that you have appropriate insurance to cover other related issues: for example, on-site injuries to employees or visitors or for loss of your customers’ goods or materials.
- Inventory List: Ensure that your business continuity plan includes an itemized inventory of equipment and the supplies you regularly use.
- Business Recovery: Build a business recovery plan. What will you do first, second, third? How will you get started? Consider contacting your competitors for help (yes, that hurts but in the end if you support your customers through this they will remember). If you run a manufacturing plant, consider the equipment you would need and how quickly you could replace the most important pieces (e.g. consider asking your equipment supplier if they have any demonstration units they could lend you until your new equipment is shipped). If you’re in the inventory business, make sure you keep inventory-turn lists and supplier information in your plan documents.
- If you own the building you might want to keep a list of pre-approved professional engineers (these will be in demand if the disaster has hit a large area) and consider an out-of-town engineer. If the building is still standing after the disaster you still may need or want a structural review before restarting operations.
Depending on the extent of the damage and the disaster, you may not want to rebuild your business. Do not make that decision too quickly. There will always be a strong emotional response to disaster. Your emotions may cloud your ability to make a good business decision. When you write your business continuity plan now – also include why you run your business and why you got into the business. After a disaster strikes, carefully review the reasons for rebuilding or not rebuilding your business. If you have a strong business continuity strategy built into your plan, it will make the decision to go forward much easier.