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by What's Working in Consulting Newsletter | March 10, 2009

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With record forest fires raging and the heart of the hurricane season upon us, it's a good time to confront the uncomfortable question: Is your practice prepared for disaster, whether natural or man-made? The Small Business Administration can provide assistance, but as the agency itself points out, the best time to respond to a disaster is before it happens. While consultants are at an advantage because they carry their most important business tools in their heads, they are still highly reliant on telephone, fax, and computer lines, as well as a variety of business records. Addressing the following questions and heeding the related tips compiled by the SBA will help you rebound more quickly from disruptive events large or small.

CRITICAL INFORMATION AND COMMUNICATIONS

  • What if my payroll, tax, accounting, or production records were destroyed?
  • What if my computer or computerized machinery were destroyed?
  • What if the local phone service were disabled?

Communications Tips:

  • Purchase a backup generator to maintain full operations or critical functions such as lighting, security systems, and computer control in the event of a power failure.
  • Make backup copies of all critical records such as accounting and employee data and client lists. Keep a backup copy of your computer's basic operating system, boot files, and critical software. Store a copy of all vital information on-site and a second in a safe off-site location. Make it a critical part of your routine to back up files regularly.
  • Keep invoices, shipping lists, and other documentation of your system configuration off-site so you can order the correct replacement components quickly.
  • Surge-protect all computer and phone equipment through power and phone lines. A power surge through a telephone line can destroy an entire computer through a connected modem. Invest in a surge protector that has a battery backup to assure that systems keep working through blackouts.

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INSURANCE

  • Is my insurance adequate to get us back in operation?
  • Do I understand what is covered and what is not?
  • Can I pay creditors, employees, and my own needs during a prolonged shutdown?
  • How long can I survive if we are shut down?

Insurance Tips

  • Review your current insurance coverage, and make it a point to do so on an annual basis. Is it enough to get your business back in operation? Will it cover the replacement cost of vital facilities? Remember that insurance on a mortgaged property probably only covers the lender with nothing left over for you.
  • Be aware of your contents insurance. Does it cover the replacement cost of critical equipment?
  • Know what your insurance does not cover. Most general casualty policies do not cover flood damage. Many require additional riders for windstorm, sewer backup, or earth movement. Consider adding coverage for likely perils, especially flood insurance.
  • Consider business interruption insurance that assists you with operating needs during a period of shutdown. It could help you meet payrolls, pay vendors, and buy necessary supplies until you are in full operation again. Also be prepared for the extraordinary costs of a disaster such as leasing temporary equipment, restoring lost data, and hiring temporary workers.
  • Don't assume that just because it never happened before, it never will. Flooding patterns are changed by development: water, which runs off new streets and parking lots, might overwhelm nearby streams and surrounding land. Landslides and sinkholes could develop because of distant earth movement, natural or man-made. The creek by your building might be a tiny, placid stream that has never flooded, but a downpour could change it into a destructive torrent that destroys your building foundation. Plan for the worst.

Source: Small Business Administration Disaster Loan Program/U.S. Business Advisor (www.business.gov)

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