It’s storm season on the East Coast, which recent experience shows can be devastating not only for homeowners, but for small-business owners, as well. Experience also teaches us that taking precautions against big storms can mean the difference between keeping cash registers ringing and putting up a “closed” sign for days, weeks or even months.
While it is impossible to change Mother Nature’s mind, small-business owners can take several steps to mitigate impacts when high winds, torrential rains, floods and other climate calamities head their way.
Preparations typically fall into three categories: mitigating losses, insuring against losses, and planning for communications and logistical disruptions. Here’s where to start.
You can mitigate potential losses from flooding, high winds and other weather issues by hardening your business’s physical location. Some preparations can be costly and take time to implement while others are relatively easy and inexpensive:
• Protect your property from flooding by building with water-resistant materials, anchoring fuel tanks, installing sewer backflow valves and raising electrical system components.
• Guard against high winds by boarding up windows and doors; removing trees and overhanging limbs; storing garbage cans, outdoor furniture and other items that can turn into windborne missiles; and making sure roofs and roofing materials are nailed down tightly.
• Move inventory or supplies to another location outside of the storm’s path before it hits. You may want to hold off on deliveries of supplies, especially if they are food or other perishable items. If you can’t ship inventory, move it higher on shelving or tables in case you are flooded.
• Back up computer data and make you have remote access to those files, as a loss of critical information can paralyze a company. The last thing you want to lose is your records on billing, inventory, payroll and proprietary documents.
Insuring against losses
Nearly all small businesses have property-casualty insurance against storms and other perils. However, Hurricane Sandy demonstrated that many did not understand their coverage, exposing uncertainty about whether or not flood damage was covered or what their deductible was for vehicle damage.
Review what your business policy does and does not cover with your agent well before an unplanned event shuts you down. You will want to know whether you are covered not only for physical damage to your property, but for financial losses due to closure from unplanned events:
• Check into business interruption insurance, which is critical for any business that cannot afford to be closed for more than a day or two. Business interruption insurance reimburses a company’s losses when it can’t serve customers because of damage or other problems due to unexpected events.
• Check to see whether your insurance reimburses lost income due to a power outage caused by an off-premises utility failure. Your business may not sustain damage, but a local power outage could keep you in the dark for several days or even longer.
• Some may want to check into coverage for losses from spoilage or temperature change — a must-have for restaurants or other businesses in the food industry.
Plan for communications and logistics
Once a hurricane or other storm touches down, communications and logistics are typically disrupted. A little planning can go a long way:
• Build a communications tree for employees. Communicating with employees can be critical to being able to keep a business running or reopen a business that has been closed in the aftermath of a storm. Knowing what issues your employees are facing in the aftermath of a storm will also help you better manage your business-related issues.
• Prepare for interruptions of landlines, computer lines, cell phones and email. Let employees know they can learn about closures and disruptions from their local radio stations, which typically relay such updates from businesses.
• Contact suppliers, distributors and other businesses that you rely on for your own operations before a storm hits and inform them that you may be forced to close for some time. Make plans for alternate communications if phones and computers go down.
Preparing for the unexpected can help protect you and your business from the unimaginable: being closed for days, weeks or even months. Take lessons from Sandy and other past storms by taking steps to safeguard your business and its value today.
Ray Sprague is senior vice president of The Hartford’s Small Commercial business, which provides property-casualty insurance to small businesses across the country.