Preparing for Uncertainty Part 1
By Rieva Lesonsky
If there’s one thing that’s predictable about entrepreneurship, it’s that it’s unpredictable. In this special 7-part series, we’ll help you prepare for uncertainty, minimize risks and protect your business.
The deadliest fire in California’s history is raging as I write this. But it’s far from the only natural disaster to strike the country this year. From deadly hurricanes and tornadoes to hailstorms and drought, multiple disasters each causing over $1 billion in damage have occurred in 2018. And after each event, we read heartbreaking stories of homeowners whose homes were damaged or destroyed and who didn’t have the insurance coverage they need to rebuild or repair.
But homeowners aren’t the only ones who need to worry about disaster protection: Small business owners do, too. According to FEMA, about 40% of small businesses affected by natural disaster never reopen their doors. In the wake of disaster, you may be unpleasantly surprised to discover that your business insurance doesn’t cover floods, earthquakes or other severe weather event.
The good news: You can protect your business by combining a well-thought-out disaster plan with the proper business insurance. The Department of Homeland Security recommends business owners take three steps:
Step 1: Identify Your Risks
What types of natural disasters are most likely to affect your region and your business? For example, where my business is located, in Southern California, I don’t need to worry about severe winter storms—but I do need to worry about wildfires and earthquakes.
Once you’ve identified the most likely potential risks, think through the problems they’re likely to create for your business. What will happen if:
- A disaster happens during business hours?
- Your building is damaged or destroyed?
- Your employees can’t get to work?
- Your customers can’t get to your business?
- Your equipment and computers are damaged or destroyed?
- You lose power or phone service?
- You lose your digital data?
Assess how each of these problems could affect your employees, your business and your customers.
Step 2: Develop a Plan
Next, develop a disaster plan. There are many resources to help you. For example, Ready.gov has Ready Business Toolkits to guide disaster planning for a wide range of situations.
Your plan should focus on:
- Protecting your employees
- Protecting your customers
- Protecting your physical plant and equipment
- Protecting your data
- Maintaining business continuity
Business continuity is one of the most important aspects of disaster planning—but it’s one that many entrepreneurs don’t think about. In the aftermath of a natural disaster, you may be unable to access your business location or equipment for days, weeks or even months. How will you continue to serve customers if you don’t have a place to work or the tools to do so?
Setting up your employees so they can work remotely can enable you to keep your business running from anywhere. Using cloud storage and collaboration tools ensures you don’t have to rely on a physical office to get work done.
Another way to protect your business is to purchase the proper insurance coverage. Depending on your assessed risks, this may include flood insurance or other specialized coverage.
It’s also a good idea to purchase business income insurance. This coverage helps replace lost business income so that you can pay your expenses until your business is back on its feet again. Business income insurance can cover situations such as:
- Losing business income because your suppliers are out of commission
- Losing business income because a key employee cannot return to work
- Losing business income due to power loss or cloud service interruption
The Hartford’s Business Owners Policy (BOP) includes business income coverage for certain situations, and you can also add additional endorsements to your policy to cover your businesses specific concerns.
Step 3: Take Action
Once you have your disaster plan and insurance protection in place, don’t just put your plan and policy in a drawer and forget about them. Talk to your employees about disaster preparedness and practice how you will respond to different disasters. Review your plans with the team on a regular basis.
Also check in with your Hartford insurance agent at least once a year or after any major changes to your business. Your agent can help you review your business insurance coverage and ensure that it’s got all the protection your growing business needs.
Disaster doesn’t have to stop your business in its tracks—as long as you take the time to do a little advance planning.
In partnership with The Hartford