Team Management

How to Prepare Your Small Business for a Natural Disaster

Steve Friess Washington Post + New York Times writer, small business owner 
plan on a whiteboard

In November 2018, as vicious flames and thick smoke approached in Paradise, Calif., Min Lee and his wife locked up their dry-cleaning shop and went home to prepare to evacuate.

Two weeks later, they returned to find the shop they had owned for six years reduced to ash, charred wood, and shattered glass. The Lees had saved their salaries from his dishwashing job and her waitress gig for more than a decade and put off having children until their mid-30s so they could “be business owners and not have to work for anybody else,” Min Lee says.

In the months that followed the historic wildfire, things went from bad to worse. The couple realized they were woefully underinsured. They would be able to replace some equipment, but the landlord doubted he would rebuild the strip mall anytime soon. Computer records of their customers were destroyed. Thousands of dollars worth of clothes were reduced to ash.

“I never thought this would happen to us,” Lee says. “We were on such tight margins, and now I have no idea what we’ll do.”

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The disastrous toll on small businesses

Experts say small businesses are especially vulnerable to the fallout of natural disasters—which seem to happen with increasing regularity these days. It seems as though barely a month goes by without a hurricane, a wildfire, a tornado, an earthquake, or some other extreme weather event—followed by a wave of bankruptcies or financial challenges for small business.

Forty to 60 percent of small businesses never reopen following a disaster, according to the Federal Emergency Management Agency (FEMA). That’s roughly half!

“Small business owners tend to concentrate on those immediate needs for them to be successful and they tend to not think about these natural disasters or even manmade disasters that can affect them,” says Gail Moraton, business resiliency manager for the nonprofit research organization Insurance Institute for Business & Home Safety (IBHS). “They don’t think about it, and if they do, they feel it’s over their heads.”

Yes, it can feel overwhelming. But as Gen. Creighton Abrams memorably said, the best way to eat an elephant is one bite at a time. Here are the key steps experts recommend—and insist aren’t as onerous as they sound—to make sure your business is prepared for a natural disaster.

Step #1: Assess your risks.

You don’t know until you think about it what “the worst” could be. It’s likely to be different for a dry cleaner in a wildfire-prone area than for a wholesale bagel factory in South Florida.

“The first thing we tell a small business owner to do is to think about risks that they’re susceptible to,” Moraton says. “Then they need to rank those risks by the probability of them actually occurring. And then, if it does occur, what would the severity be?”

Common risks

One piece of assessing risk is determining what major disasters are likely in your region:

  • Florida, the mid-Atlantic states, and the Gulf Coast are prone to hurricanes.
  • The Mountain West and Southwest suffer forest fires routinely, especially in this prolonged era of drought.
  • Oklahoma and other Plains states are notorious for deadly tornadoes.
  • Blizzards and ice storms are common in New England and around the Great Lakes.
  • Earthquakes rattle California, Oklahoma, and Alaska.
  • Volcanoes erupt in Hawaii and Washington.

FEMA’s website offers a Hazard Identification and Risk Assessment tool to help you figure out what could affect your business.

How to assess risks to your business

“I just sit with the business owner and say, ‘OK, let’s think about where your business is located,’” says Lisandra Pagan of Deliberate Plan, an emergency preparedness and recovery consultant based in Orlando, Fla. “Is it a flood-prone area? Is construction going on? Let’s see what the future plans are for development. How is this going to affect your sales?”

And don’t just look out for the disasters that make headlines.

“There are lots of different disasters that may not be the big, hairy, scary things that make exciting movies, but they could be equally impactful,” says Deidre Pattillo of the Institute for Economic Development at the University of Texas at San Antonio. “We encourage businesses to be ready for anything.”

To make sure you’ve covered all the bases, Pattillo recommends you ask yourself these questions:

  • What is the immediate physical risk to me and my employees?
  • What is the immediate risk to my business operations overall?
  • How likely is it that I won’t be physically able to get to my business?
  • Are there disasters that can happen to my suppliers or customers that would affect my business?

“Most of the time what we see is that a short interruption is not a big impact, but if the store or the restaurant or the business is closed for a week, we see a bunch of losses that start piling up because it’s a ripple effect,” Pattillo says.

If people see your doors are closed, they may not come back immediately. So it pays to recognize and spend time preparing for events that could put your business out of commission.

Step #2: Prepare with plans and processes.

“Business owners sometimes tell me, ‘I’ll know what to do if something happens. It’s all up in my head,’” Moraton says. Spoiler: You won’t. That is, unless you have a plan.

The key here is to make a list of everything your company does and determine which employees, procedures, and equipment are necessary to keep your business operating.

While that sounds time-consuming, it only has to be done from scratch once. Pattillo says, “If everyone on your team is engaged, it can be done efficiently.”

Moraton offers a set of questions to ask yourself:

  • What is the most important business function?
  • Do you have employee and banking contact information, and have you considered how you’ll pay employees if they scatter amid a crisis?
  • What bills do you have to pay regardless of the circumstance?
  • What sort of software or machinery do you have, what does it do, and is it insured?
  • Have you assigned employees to take on certain tasks, and do they know what they are responsible for in an emergency?
  • What ways can you get your work done remotely if the office is inaccessible?

You can also build preventative measures into your day-to-day processes.

“Maybe you store things that can get damaged by water in plastic containers,” says Pagan. “Always have an idea of what could go wrong so you can fix it before it’s happening.”

Still not sure how to start planning? A great first step is to fill out IBHS’s free “Stay Open For Business” questionnaire.

Step #3: Insurance! Insurance! Insurance!

Three Brothers Bakery shut down for three days in 2001 when Tropical Storm Allison dumped 3.5 feet of water into the Houston business. The owners, the Jucker family, had gone more than 40 years in that location without a calamity—and without flood insurance.

They immediately set out to rectify that—and it’s a good thing they did. Their run of bad luck was just beginning:

  • In 2008, Hurricane Ike tore their roof off.
  • On Memorial Day in 2015 and Tax Day in 2016, storms flooded the business.
  • In December 2016, a fire destroyed their main freezer.
  • In August 2017, Hurricane Harvey dumped 4.5 feet of water into the business and shut down Three Brothers for 17 days.

The Juckers now half-jokingly refer to themselves as the “reigning King and Queen of disaster,” but perhaps they ought to better be known as the most insistent evangelists for being properly insured and knowing what’s in your coverage.

After Ike, Janice Jucker says she “pulled the book out and started reading the policy line by line with a highlighter.” The list of benefits in her policies was exhaustive. Beyond typical flood and property coverage, they had:

  • Business interruption insurance to pay employees and recoup lost revenue for up to a year.
  • Insurance to fix a 25-foot sign that had fallen.
  • Ordinance or law insurance to pay for renovations required by new regulations, which paid to retrofit their bathrooms to be compliant with the Americans With Disabilities Act.
  • Money for marketing for four months after reopening.

“The big thing we learned from Ike is, you have to ask,” Janice Jucker says. “Don’t think because you have insurance, they’re just going to pay you. It doesn’t work like that. You have to sell them on paying you. At one point, I made a PowerPoint presentation and they finally gave us the lost revenue piece.”

How to find the coverage you need

“There is nothing simple or obvious about insurance,” says Lauren Hyland, a former insurance consultant who now owns a Pittsburgh-based marketing consultancy. Hyland says the key is to “find an awesome agent because an agent will be able to tell you exactly what is and what is not in your policy.”

She says finding one requires two things:

  1. Reading online reviews
  2. Chatting up other business owners about who they use

“If there was a large natural disaster, check who the business owners who had damage had their policies under,” she says. “Ask them how it worked for them. Did the agent go to bat for them? Did they get their claims paid? Or did they say, ‘Oh, sorry, we can’t help you. It’s not us. It’s the insurance company.’”

That is exactly what the Juckers did. Their current agent also served the business of a friend who successfully reopened after a one-year closure due to a fire. “When we walked in to the office, we said, ‘That’s what we want, what they had,’” she recalls.

Businesses who use cookie-cutter policies and act as their own agents may save money in the near-term, but when the calamity hits they’re on their own.

Still, Janice Jucker says, it remains the owner’s job to understand what’s in their policies. “It is your responsibility because guess who’s out the money when you have a disaster? You. Not the broker. You.”

Step #4: Secure your vital business information somewhere.

One of the Lees’ biggest mistakes before the Northern California wildfires was failing to keep a copy of their customer list somewhere off-site. When the shop caught fire, the only sales and contact records were on paper and on the hard drives of their computers.

“This is what I am most embarrassed about because we should have had digital files of everything in the cloud,” Min Lee says. “We just never thought about it, to be honest.”

Pattillo says now’s the time to start thinking about it.

“You must make sure you have remote access to everything, like something as simple as using QuickBooks Online versus on that old desktop computer,” she says. “Make sure not only that you’re backing up things, but that you can access them in the right format.”

To make sure you’re protecting your vital information, Moraton suggests asking these questions:

  • Do you have contact and emergency contact information for employees, suppliers, lawyers, accountants, and local utilities?
  • Do you have the documents and contact information for all types of insurance you’ve purchased?
  • Do you have a digital copy of all your contracts, including leases?
  • Does at least one person other than you have a way to access all of this?

Step #5: Don’t rely solely on the government.

“Do not call FEMA,” Janice Jucker admonishes. “Put that in big bold letters. Don’t even waste your time on hold. They cannot help you.”

The notion that some public agency or charitable organization is going to swoop in after a major disaster is a widespread misunderstanding. Their most pressing responsibilities are ensuring people are safe, sheltered, and fed. Getting your barber shop back on its feet is not their job.

“There’s no government, there’s no nation that can help everybody,” Pagan says. “Most people will have to wait at least 10 days until you hear from someone.”

The government does offer low-interest 30-year loans of up to $2 million through the Small Business Administration for physical damages or working capital. Be prepared, though:

  • Set aside a full day for the lengthy in-person application process.
  • Be prepared in case the loan funds don’t arrive immediately.
  • Contact your local elected officials if disbursement of the money takes more than a month.

Such help can stabilize a business, but it’s no path to prosperity, Janice Jucker says. Before Harvey, Three Brothers Bakery “had a pretty decent balance sheet. We had a line of credit loan that we were paying off by the end of the year. But now we have almost $1 million in disaster loans. That was spending for survival, not for growth.”

Step #6: Review your plans regularly.

You’re not done once you’ve created your contingency plans for disasters. They need to be reviewed on a regular basis to make sure that all of the contact information is up to date, all the latest documents are in the cloud, and all the employees know what to do.

“Maybe every six months, you’re making sure that you have everyone’s correct mobile phones, residence phones, email addresses, and things like that,” Moraton says. “And the same goes for information about your key customers and vendors. These things do change.”


If all of this scares and overwhelms you, you’re not alone. But these are questions you won’t want to struggle with in the middle of a disaster.

“You’re going to be confused, you’re not going to what to do, so the best thing is to have a checklist because you really need structure at times like that,” Pattillo says. “You cannot wait until you are in a crisis to start trying to craft the plan. It doesn’t work.”

Updated: June 26, 2019

Steve Friess
Steve Friess Steve Friess is a Michigan-based freelance writer whose work appears regularly in the New York Times, New York Magazine, BusinessWeek and many others. He is also CEO of Bagels Etc., the largest wholesale bagel manufacturer in South Florida.

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