Five Disaster Planning Steps for Small Businesses

Aug 09, 2016

MoneyLife100 Could your business bounce back if a disaster occurred? According to the Federal Emergency Management Association (FEMA), almost 40 percent of small businesses that close temporarily due to a natural or other disaster ultimately never open their doors again. However, it's possible to weather any type of business interruption if you’re properly prepared. The Pennsylvania Institute of Certified Public Accountants offers these tips to ensure you’re ready for anything.
  1. Consider the Risks

    Some disasters, such as fires or a burst water pipe, can hit any business, but others are more likely based on your location. As part of your initial planning, brainstorm all of the potential disasters that might reasonably affect your business to help begin to determine the best possible responses. 

    When the National Federation of Independent Businesses surveyed small and medium-sized businesses a few years ago, 62 percent said that losing profits and clients was the biggest challenge after a disaster. In your own planning, consider all the threats that could hinder your recovery. For a service company, the inability to communicate with clients or with fellow employees could be a serious problem, while manufacturers and retailers may face a significant hardship if there are disruptions to vital deliveries of supplies or merchandise. Once you decide what kinds of damage or losses could bring your business to a halt, you’ll be in a better position to prepare for them.
  2. Commercial Property & Casualty Insurance

    Properly written commercial property and casualty insurance policies should cover your building and contents for losses incurred from fires, hurricanes, tornadoes, tree damage, theft, and snow/ice damage.  In addition, business owners policies (BOP) will typically cover 12 months of lost business income. Cyber and privacy policies will cover losses and the cost of defending against data breaches. Most losses can be insured against.  It is important to develop a strong relationship with an experienced commercial property and casualty insurance agent to ensure proper coverage.
  3. Survey Your Systems

    Review your business systems to determine your options if one or more are affected by a disaster. For example, would employees still be able to do their jobs if they were unable to get into your office, store, or plant? Could they keep the business going, at least temporarily, using home office equipment such as mobile phones and laptops? What separate location can you use to keep copies of vital company records, customer information, and details on passwords and other access codes? If your business is a manufacturing company, do you have access to another facility you can use until the crisis is over? If you are a retailer, where can you turn to find a short-term location if necessary? Consider these questions, and possible answers, well before an emergency occurs.
  4. Take Your First Steps Now

    Even a short business interruption can cause problems for companies. Power outages, for example, can occur at any time, even without a significant disaster. With that in mind, consider acquiring generators to keep your operation running. Use surge protectors with your computer equipment. Keep a fire extinguisher on hand, and make sure employees know how to use it and how to evacuate in case of a fire or other emergency. Be sure company leaders and vital support staff have contact information for all employees.
  5. Create a Business Continuity Plan

    At the end of your planning, you want to be able to answer one key question: What will it take to get the business up and running in case of a disaster? The answer will vary for every company, which is why it’s so important to create a business continuity plan customized to your unique needs. These step-by-step plans detail what’s necessary to return to normal operations—or at least enable you to weather the storm.
Consult Your Local CPA

Your CPA can offer advice on addressing disaster preparedness concerns and creating a business continuity plan. Turn to him or her for all the information you need to make critical decisions that will enhance your small business success. For more information on this topic or to access the CPA locator, visit

Original publication date: Oct. 1, 2014

The Pennsylvania Institute of Certified Public Accountants (PICPA) is a premiere statewide association of more than 22,000 members working in public accounting, industry, government, and education. Founded in 1897, the PICPA is the second-oldest state CPA organization in the United States.

Money & Life Tips are a joint effort of the AICPA and the Pennsylvania Institute of Certified Public Accountants (PICPA), as part of the profession’s nationwide 360 Degrees of Financial Literacy program.

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