By Steven Cohen
Disasters can include natural occurrences like hurricanes and ice storms; cybersecurity breaches; onsite events such as plumbing failures and fires; or anything else that causes businesses to shut down. While health and safety are the first concerns that small business owners have when disasters occur, questions about financial impacts and how to successfully manage recovery quickly follow.
With sufficient preparation, your small business can be better positioned to recover, and putting the right steps in motion can ensure the smoothest rebound. Begin with a thorough plan so that you and your employees know what to do in an emergency, and follow through with these four steps to help your small business bounce back.
Step 1: Communicate with employees
If you have employees, you’ll want to ensure their safety and well-being and communicate next steps to them. Ideally, they’re already in the loop because you took the time to properly prepare for disasters and they know the drill. Either way, though, you’ll want to keep them informed and, if appropriate, let them play roles in helping with your business’s recovery. Let them know whether they should be onsite or stay away, what your work expectations are and what they can expect from you. Can employees work remotely (perhaps at another of your business’s locations)? If necessary and possible, manage operations from a temporary location, whether that means working from home or setting up shop short-term in another storefront.
If your business needs to shut down for a time, your employees will have financial concerns, too, so be open about how you’ll manage payroll, benefits and other issues. Keeping them informed will go a long way to alleviating many of the stressors around a disaster and build employee loyalty, too.
Step 2: Contact insurers immediately
If your small business has sustained any type of damage or could because of the impact on vendors, suppliers or others, contact your insurance agent and keep detailed notes about your meetings and conversations. You should have thorough pre-event documentation of your property, inventory and assets including photographs and receipts, and financial documents to back your claims. You’ll also need to take photographs of any damage your business sustained. In addition, be sure to consider potential lost income during the time that your business is closed. Your agent will be busy, too, so schedule follow-up calls or meetings to keep things on track.
If the disaster you incur is cyber-related, contact an expert in data security to help you begin an investigation, as most small business owners don’t have the technical expertise or staffing to do this. This is someone that should be identified in advance of an event and whose contact information should be kept with your other emergency contacts.
Step 3: Communicate with clients and vendors
Regardless of the type of event you experience, it’s unlikely that your business will be the only one impacted – typically, there’s a domino effect that impacts your clients, vendors, suppliers, or others. What are the implications for them? Is their information safe and secure or are the goods they ordered from you available? How can they get services (for clients) or payments (for vendors)? You’ll want to communicate this early on. By doing so, you’ll build trust and may find additional resources that can help you, too. For example, a client may offer you temporary office space or a supplier may negotiate different delivery or payment terms.
And again, if the disaster you incur is cyber-related, you’ll need to work quickly to contain any damage – like the theft of customers’ financial or personal information – and communicate with clients, vendors and others who may be impacted. How you manage this can determine how well your business bounces back, so in addition to bringing on an expert who can investigate the crime, have the name of a public relations professional who can help you minimize damage to your business’s brand.
Step 4: If necessary, tap into emergency funds, a business line of credit or a disaster loan
Following disasters, many small businesses never reopen, primarily due to the financial strains. If you decide to reopen, do you have sufficient working capital on hand or available through a business line of credit? It’s common for businesses to wait several months or longer for insurance reimbursements, and having access to at least 3-6 months of working capital can make all the difference in how quickly and how well your business recovers.
Banks recognize that small businesses are vital to the communities they serve, and your commercial banker will have information regarding business lines of credit, loans or other services that can help with recovery. In addition, your banker may guide you to federal or local agencies or partners, like local Small Business Administration (SBA) or community development financial institutions (CDFIs, like Excelsior Growth Fund). In these circumstances, there may be special funds earmarked to help small businesses reopen, and these loans often have low interest rates or special payment terms. Keep in mind that to qualify for disaster loans, you’ll need to provide very accurate financial information, so verify ahead of time that your accountant has reported all business assets and liabilities in the balance sheet of your business’s tax return – a common error that can decrease loan approvals.
While small business owners hope that they’ll never need to take recovery actions, with the increasing intensity and frequency of many natural disasters, the growth in cyberbreaches directed to small businesses and, unfortunately, an uptick in other human-made events, it’s best to plan for the worst, hope for the best and know what to do to ensure your business’s financial recovery should you be faced with a critical situation.
Steven Cohen is president of Excelsior Growth Fund (EGF), which helps New York State small businesses grow by providing streamlined access to business loans and advisory services. Steven has a bachelor’s degree from UC Berkeley and a master’s in public administration from Harvard’s Kennedy School. Follow on Facebook Excelsior Growth Fund.