When Disaster Strikes

William Lynott

Many of the thousands of small businesses destroyed by the catastrophic effects of Hurricane Katrina will never reopen their doors. However, many others are already back in operation and on their way to a healthy recovery.

The difference? In most cases, say the experts, the fortunate ones are those that had a disaster preparation and recovery plan to guide them through that traumatic time.

Depending on your restaurant's location and other factors, the odds of you being the victim of a catastrophic loss from wind, water, or fire may be greater or lesser than average. However, every restaurant owner faces some risk of a crippling disaster.

"Of course, not every disaster is a major catastrophe," says food industry consultant Izzy Kharasch. "Restaurant owners need to be prepared to deal with small disasters that can easily turn into major problems," he adds. "A patron could slip and fall or a windstorm could damage the building."

The key to minimizing the risk from disasters large or small is a well-thought-out plan of action. Here are a dozen steps you can take to help your business avoid or recover from a catastrophic loss:

CREATE A DISASTER PREPARATION AND RECOVERY PLAN.
"Every small business owner needs to have a disaster preparation and recovery plan, even if the business is located in a relatively low-risk area for natural disasters," says Gene Fairbrother, consultant to the National Association for the Self-Employed and an expert in disaster planning. "Even if it is not formally written down, you need to consider how you will continue operating if disaster strikes."

Your plan shouldn't be a cumbersome, complex project, Fairbrother says. "To be effective," he explains, "it should be a model of clarity, fully understood by every employee."

Whether it's in writing or not, it's important to refresh your plan periodically. "Some basics of a disaster plan seldom change," he says. "For example, your evacuation destination, or the first things you'd grab on your way out if you had to evacuate in a hurry. However, other things do change, such as contact information on vendors, income and expense records and places to find replacement equipment. Review your disaster plan at least once a year to make sure it still works for your business."

MAKE YOUR DISASTER PLAN COMPANY POLICY.
"It's important to make your disaster plan a permanent part of your business philosophy," says Fairbrother. "However, it often takes another set of eyes and ears to point out the cracks in a plan, or to spot missing components. That's why you should share it with someone else, especially your employees. They may find a flaw or an important step that you missed.

"Beyond the possibility that you might owe some employees a paycheck, a business owner has little or no legal obligation to employees if the company closes due to a disaster," he says. "Still, you need to make your employees part of your disaster plan. Failing to do so will hinder your ability to get the business back up and running if the need arises."

MAINTAIN AN OFF-SITE BACKUP OF ALL COMPUTER RECORDS.
According to one estimate, 90% of all business records are now electronic. That makes protection and recovery of vital business information easier, provided a careful system of backing up is in place.

Most restaurant owners have learned the importance of backing up business information on their computers, but not everyone does a complete job. "At the very least, says Kharasch, "a restaurant owner should make weekly backup copies and store them at home."

Stefan Dietrich, Ph.D., co-author of the book, Contingency Planning and Disaster Recovery: a Small Business Guide, stresses the importance of maintaining an up-to-date backup copy of critical data at an offsite location. "Unattended automated backups are better than using CDs," he says. "Typically, most people don't follow through with creating CD backups. For that reason, automated online backups to a remote location via the Internet are much better."

"A decade ago, I chose to protect one of the most valuable assets of my business, its data, by taking the appropriate steps to make sure that it would be safe from a hurricane," says Steven Rothberg, president of CollegeRecruiter.com. "Although the chances of a hurricane hitting Minneapolis are almost nonexistent, I believe that such a strategy is a good investment for any business that depends on information. As a result, all of our data is automatically backed up every night via an encrypted Internet feed to California." You can obtain more information on internet backups at http:// www.atbackup.com.

Regardless of the system you use, you must be sure that your backups are working properly. "You should test them regularly and be aware of typical recovery time," says Dietrich.

STORE COPIES OF IMPORTANT PAPER RECORDS OFFSITE.
Some of your most important business records may be in paper form. Scott Daugherty, of the Small Business & Technology Development Center at the University of North Carolina, suggests that you make copies of important business papers such as tax returns, financials, insurance policies, leases, and contracts and store them in a separate location from your business.

SAFEGUARD YOUR MOST PRECIOUS BUSINESS ASSET.
Put simply, the goodwill of your customers is the foundation for the continued health of your business. Of all your business assets, your customer list is among the most valuable and irreplaceable. Your plan should include specific steps designed to keep your customers informed of your situation throughout the crisis period.

"If you are out of business for a few days—or longer— you need to let your customers know what is happening and when you expect to reopen," says Fairbrother.

One possibility is newspaper or radio announcements. If you maintain any sort of list of regular customers, you must do everything possible to make certain that you have access to that list. "As with other business records," says Fairbrother, "it's best to store copies offsite."

REVIEW YOUR INSURANCE COVERAGE.
"Carefully review your insurance policy to make certain it is appropriate for your needs," says Donna Childs, CEO of Childs Capital LLC and co-author of Contingency Planning and Disaster Recovery: a Small Business Guide. "You should have business interruption insurance to replace lost revenues if your operations are disrupted due to a disaster." According to Childs, the failure to include business interruption insurance is the most common error in disaster planning for small business.

Childs suggests that you take digital photographs of your difficult-to-value assets and preserve them online where you can access them remotely. "This will be a great help in the event you have to file an insurance claim," she says. "Also scan critical documents, such as your insurance policy, building lease and so forth and have digitized copies available online for the same reason."

IS LOOTING A POSSIBILITY?
Looting in the throes of a natural disaster is an unfortunate and often unexpected phenomenon. However, in the sometimes-dark world of reality, looting of businesses crippled by a catastrophic event is becoming a not-uncommon occurrence.

The most frequent victims of this behavior are retail stores, so your restaurant may not be a likely target of looters. Still, with critically needed food (and especially if you stock liquor), protection against looters should be a part of your plan. In addition, expensive office equipment such as computers and any equipment that thieves could carry away are potential targets.

Your ability to plan for protection against looting will depend heavily on the configuration and location of your property, so the specific details will be largely up to you.

PROVIDE FOR BACKUP POWER.
"Consider the use of a backup power generator," says Kharasch, "so that if a disaster strikes it is not made worse by not having lights and power to at least get people out to safety. Also, having a backup battery for the computers should be part of your plan. Even if it lasts for only 2-3 hours, it will give the operation time to get checks out, close out servers and shut down the system with records intact.

POSTDISASTER CONTINGENCIES
In the unfortunate event that your restaurant is partially or fully wiped out by a natural disaster, your plan should include guidance on how to get it up and running again as quickly as possible. These basic suggestions should be part of your plan:

• Provide physical security. In the aftermath of any natural disaster, security of business assets is almost certain to have been compromised. As soon as it is possible to do so, you should put any parts of your plan dealing with physical security of business assets into effect.

• Know who is there to help you ... and let them know you need their help. "If you are involved in a major natural disaster, you should be prepared to make early contact with any organization that may be able to offer assistance," says Ernest Vendrell, Ph.D., Assistant Professor of Emergency Planning Programs, Lynn University, Boca Raton, FL. Some of these agencies include:

"In addition to a variety of educational and training guides," says Vendrell, "FEMA also offers a number of disaster planning courses that are typically offered free of charge."

"It's important, too, to maintain ongoing contact," says Fairbrother. "During a major disaster there is always much confusion and you don't want your business to be the one that falls between the cracks."

• Submit insurance claims on a timely basis. "Don't risk a possible denial of a valid claim for failure to give timely notice of the disaster," says Childs. Review all policies that may apply to a disaster, including expired policies and umbrella or excess coverages."

• Keep your customers and vendors updated on a frequent basis. If you have retained information on your clients and vendors as recommended above, you should use whatever means available to keep them updated on your situation.

"Remember that your vendors have businesses of their own to run, and your regular customers will want to know if you have closed down or when you will be back in business," says Fairbrother. "In most cases everyone will work with you in your time of need. However, don't lose sight of the fact that vendors and customers have needs of their own and must continue to take care of those needs. Maintaining contact with them will increase the likelihood that they will stick with you instead of straying off to a competitor."

Every year, thousands of unsuspecting business owners find themselves victimized by a natural disaster. That's why investing a little time on a disaster preparation plan now will be a wise business investment.

William J. Lynott is a former management consultant and corporate executive who writes on business and financial topics for a variety of consumer and trade publications. You can reach him at [email protected] or through his website: www.blynott.com