Disaster preparedness is something every small business owner should be incorporating into their planning and new data is showing us just how important it can be to saving the future of a life's work. In a recent Federal Reserve Banks survey, this report examined the business conditions, insurance coverage, and credit environment of small businesses located in FEMA-designated disaster zip codes. Of the affected firms, the survey revealed that only 4 percent did not have any revenue losses, 61 percent had revenue losses ranging from $1-$25,000, and 35 percent suffered in losses more than $25,000.

The reality is that most small business owners can't recover from those type of loses. In fact, as many as 40 percent of small businesses will never reopen their doors following major natural disasters such as these.

A BizBuySell poll just last year revealed that while one in five business owners believe climate change poses a threat to their business, a whopping 77 percent of shopkeepers do not have a natural disaster plan in place. For small businesses situated along the coast and in designated disaster areas, the recovery from events like hurricanes and flash floods can take years -- assuming they can even recover at all. As seen with last year's hurricanes Harvey and Irma, it's crucial for companies to consider environmental emergency plans as part of their long-term business strategy.

How small business owners can mitigate damage from the unexpected natural disaster

Almost every state is subject to some kind of natural disaster throughout the year, with some regions more susceptible than others. Small businesses in California, for example, are likely to experience wildfires and earthquakes while businesses in Florida should expect to deal with hurricanes and tropical storms. Similarly, businesses situated in the Midwest are privy to tornadoes and flash floods while companies in the Northeast battle blizzards every winter. But even without physical damage, the loss of power and lack of customer spending can leave small businesses hurting for cash for several months at a time.

Mother Nature waits for no one, and small business owners can't afford to be caught off guard when the next natural disaster lands in their city. Proper disaster planning can go a long way in providing shopkeepers peace of mind and reassurance that, in a worst-case scenario, their business is ready and able to withstand the elements. With the unique location-based challenges in mind, small business owners can take several steps to mitigate damage and reopen for business much sooner:

  • Transfer business documents to the cloud: Whether your business is threatened by a hurricane or a fire, the loss of paper documents and physical records can be devastating. To prevent the loss of documents like invoices, payroll and other financial paperwork, small business owners should try moving their paper records to the cloud. Digitizing important documents ensures shopkeepers can access their records from anywhere, making it easy for employees to continue working on projects wherever there is Internet access.

  • Get appropriate coverage for regional disasters: Depending on location, insurance rates for small businesses can fluctuate and cover a variety damages. Businesses in tropical areas like Florida will need insurance to cover hurricane and flood damage, while companies in drier regions need to protect themselves against wildfires. The SBA offers two different loans to help disaster victims; one assists with physical damage incurred while the other covers any economic injury. Before owners seek out insurance quotes and coverage plans, they'll need to evaluate what type of disaster they're protecting against and to reduce extraneous costs.

  • Put aside enough funds to cover several weeks of expenses: One of the first things affected by a natural disaster is the spending power of the consumer. With jobs on hold and damages to repair, customers will be prioritizing items like food and water over luxury goods. Well before disaster strikes, small business owners should be saving enough funds to cover at least two weeks of operating expenses, payroll and inventory management. Taken from BizBuySell's poll, 40 percent of owners who have both insurance and savings responded as confident, that their business could survive a natural disaster if they were forced to close for more than one month.

Small business owners need to prepare for anything that could harm their business and shopkeepers who assume they are impervious to any natural disaster puts their entire business at financial risk. From short-term disruptions to long-term damages, business owners need disaster plans in place to minimize the impact of any disaster on their livelihood.

Published on: May 8, 2018