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As a nation, we learned several hard lessons following the recent natural disasters in Oklahoma and along the Hurricane Sandy-ravaged East Coast. While we often think of the devastation inflicted upon individual community members, we can’t overlook the effects that natural disasters have on the backbones of our local economies: small businesses.
If a small business can’t resume operations within 10 days following a natural disaster, the chances are it won’t survive, according to Bolt Insurance Agency. The Federal Emergency Management Agency (FEMA) estimates 40 percent of businesses do not reopen after a disaster, and of those that do reopen, 25 percent fail within one year. What’s more, many small businesses do not have disaster preparedness plans in place, according to FEMA.
After a category five tornado hit Oklahoma in May, thousands of small businesses in the area struggled to recover. More than 6,000 companies in Moore, Okla. – a region heavily populated with small businesses – were affected, compromising sales of more than $1.4 billion according to a report by Dun & Bradstreet. Eight months after Hurricane Sandy hit, businesses in New Jersey and New York are still trying to get back on their feet. In New Jersey, nearly 19,000 businesses sustained damage of $250,000 or more, and total business losses neared $8.3 billion, according to findings from the National Hurricane Center report.
“Natural disasters pose serious threats to small businesses’ sustainability and survival,” says Tony Pica, senior vice president and Mid-Atlantic Business Banking Group executive market president, Northern Virginia at Capital One Bank. “We know that a single storm can produce billions of dollars in damage, which hurts local economies and causes too many small businesses to fail. Our recent Small Business Barometer survey shows that small businesses are feeling optimistic about their financial futures, which is great news. However, we don’t want these businesses to undermine their chances for long-term success and growth by being unprepared. It is essential for local businesses to be ready when disaster strikes – whether it’s a fire, hurricane or tornado.”
Capital One offers these tips and guidelines designed to help small businesses prepare for and mitigate damage caused by natural disasters or other unexpected emergencies:
1. Identify an alternate location: For many business owners the recovery process after a natural disaster can be lengthy. Consider moving employees to an alternate work site, such as a satellite office or hotel ballroom. Whatever location you have available, make sure to equip it with critical equipment, data files and supplies.
2. Customer preparation: Make sure your customers know what to expect from your company in the event of a prolonged disaster displacement. Publish backup business or store locations on your website, and make sure your customers know your company’s emergency contact information for sales and service support, and alternative methods for placing orders and payments.
3. Document your property: Take pictures of your property before a disaster strikes. This can help insurance companies assess the damage from the storm, and ensure you get the help you need.
4. Be prepared to meet emergency cash-flow needs: Make sure your bank accounts include emergency funds, and keep enough cash on hand to handle immediate needs. Issue commercial credit cards to essential personnel to cover emergency business expenses. Use online banking services to monitor account activity; manage cash flow; initiate wires and pay bills; reduce dependency on paper checks and the postal service to send and receive payments; and make night depository drops as early as possible if a threat is imminent.
5. Identify tools needed for business to continue: Prioritize critical business functions and how quickly these must be recovered.
6. Employee preparation and communication: Make sure that you not only have reliable methods of communicating with employees during a disaster, but that your employees are informed and knowledgeable about the company’s emergency plan. Make sure that contact information for employees, key customers, important vendors and suppliers, and insurance companies are not just backed-up but accessible electronically for employees.
7. Recovery: Once your business is running again, compare what happened against your company’s disaster preparedness plan. Capital One offers a Disaster Planning Checklist to help small business owners assess their own plan, and minimize the impact of a disaster should one happen again.
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