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Disaster Plan: Why You Need It and How to Create It

Natural disasters can wreck your business. Hurricanes, earthquakes, volcano eruptions, meteor strikes, terrorist attacks, nuclear meltdowns, viral contagions and other mishaps can cause power outages or shut down key vendors, events that can cripple small businesses. According to the Institute for Business and Home Safety, 25 percent of businesses that experience a major disaster never reopen. That number rises to 40 to 60 percent when considering small businesses only. Furthermore, 90 percent of businesses fail within a year unless they resume operating within five days. The best defense is a properly drawn and frequently updated disaster plan. The plan should allow you to get back into operation quickly so that you can provide your offerings to your community.

The Big Picture

Your disaster plan needs to encompass the full range of contingencies that result from a natural or man-made disaster. The basic topics should include:

  • Identify your recovery team: Who will be in charge of crisis management, who will populate the recovery management team, how will you notify employees and maintain communications among all parties?
  • List types of disasters that are most likely: Rate the probability of each event’s occurrence so that you can concentrate on the most likely.
  • Identify alternate locations: Locate recovery and backup locations, and create relationships with your local disaster recovery service providers. Allocate space for a suitable emergency command center.
  • Create communications plans: Develop plans for internal and external communications, including an employee phone tree, emergency phone numbers, re-routing critical phones, and providing non-phone alternatives such as email.
  • Recovery plan for technology and data: Document all your computer technology and data backup facilities, including access to cloud-based files. Develop technical procedures to recover after interruptions, and layout which employees or vendors are responsible for restoring operation of critical technology. Ensure off-site backup and make plans for alternate computer centers.
  • Plan to restore operations: Each job function and employee responsibility should be well documented. Develop a plan to restore critical operations first and assign emergency management tasks to selected employees. You will need a way to track disaster costs and a person made responsible for this tracking. Review your business insurance to ensure it will help get you back into operation quickly.
  • Set up contingency financing: You will want to pre-qualify for commercial small business loans to help you pay the steep costs associated with disasters. Quick access to cash can make the difference between survival and bankruptcy.
  • Work out plans with supply chain: You will need to effectively communicate with suppliers and vendors, both local and distant, to ensure you can continue to receive critical materials and services. Identify all supply chain participants and store the list offsite. Share your plans with your vendors and create secondary relationships with alternate suppliers.
  • Ensure safety: Put together disaster recovery kits that include medical supplies, survival rations, flashlights, hand-crank radios and other emergency gear. Make sure you have an evacuation plan, perform drills and establish emergency shelter locations.
  • Test and maintain: Perform a simulation recovery at least once per year. Create systems to record the results of drills and evaluate results for improvements to the plan. Make sure you communicate any plan changes to employees.

Have Your “Go Bag” Ready

If you have to evacuate, you should be able to grab your “go bag” with a minimum of fuss or assembly. Suggested items include a fully charged laptop preloaded with all critical information, including emergency contacts, passwords, insurance policies, and floor plans if appropriate. It should also contain cash and credit cards, first aid supplies, critical medications, and basic office supplies.

If you’d like detailed guidance in setting up your business disaster plan, visit the U.S. Small Business Administration website.