Insurance and Security

Business continuity and disaster planning for your small business

Preparing your business for potential natural disasters can be a lifesaver.

Approximately 10-12% of small businesses close every year in the United States, according to the U.S. Small Business Administration. Some businesses shutter voluntarily, but others have little choice in the aftermath of floods, blizzards, hurricanes, tornadoes, earthquakes, and wildfires. Of businesses that have fallen prey to natural disasters, 1 in 4 will never reopen, according to the Insurance Institute for Business & Home Safety (IBHS).

Businesses are often unable to recover from disasters because they lack a recovery plan, suggests Gail Moraton, business resiliency manager for IBHS. "A business without a plan is at risk because the owner doesn't know what steps to take before and after a disruption," explains Moraton. She recommends small business owners work to protect their companies and ensure business continuity with three simple steps:

1. Assess your risk

Knowing which disasters are most likely to impact your business is the first step toward assessing your risks, according to Scott Teel, vice president of marketing at Agility Recovery, a Denver-based provider of business continuity and disaster recovery services.

"The most likely risks can be something as dramatic as a hurricane or an earthquake, or something as small as a construction accident near your office that cuts off your power," explains Teel. He recommends making a comprehensive list of possible business interruptions and plotting them on a threat matrix with four quadrants:

  High Impact Low Impact







"If something is low likelihood and low impact, you may not want to invest a lot of time, money and resources into mitigating it," says Teel. "Instead, focus your efforts on things that are high likelihood and high impact."

For help identifying potential disasters in your area, Moraton recommends searching online for your city's or county's hazard mitigation plan, in addition to using IBHS's free ZIP code tool.

2. Make a plan

To help guide your disaster plan, you can use complimentary planning forms, like IBHS's OFB-EZ (Open For Business-EZ) Toolkit. This resource outlines the key components of a small business disaster recovery plan and, in addition to addressing potential risks, provides forms you can use to ensure you have a plan for all aspects of your business. Each form helps you document the following aspects of your business:

  • Critical business operations: What are the primary tasks you and your employees execute every day that generate revenue? Create a backup plan that will allow you to continue operations if your business lacks power, facilities, personnel, etc. Consider a reciprocal aid agreement: a partnership with a business similar to yours that will have the specialized equipment you need to fill orders — and vice versa — in times of need.

  • Employees: Make sure you have a current list of your employees, their contact information, and emergency contacts.

  • Customers and vendors: Likewise, ensure you have a comprehensive list of phone numbers and email addresses for key customers, suppliers, vendors, and anyone else you might need to contact in the event of a business interruption.

  • Finances: Whether you're facing a literal storm or a figurative one, your business will need cash to weather it. Documenting bank accounts, lines of credit, and payroll services — as well as who can access them and how — is critical.

  • Information technology: List the systems and software your company uses, as well as where and how the business stores critical data. Make sure you also have a plan for regularly backing up that data, and that employees know where backup files are stored and how to access them.

While you're creating your company's emergency plan, Teel recommends documenting communication protocols — including who you'll contact with information about your business status, who will initiate communication, how often you'll share updates, and what media you'll use — and reviewing financial accounts. Along with a business line of credit and a rainy day fund, he says, it's important to have adequate insurance, which will include business interruption coverage to replace revenue lost while your business is down and added expense coverage to pay for recovery-related equipment, like power generators.

3. Test, revise, share

Once you have a disaster recovery plan in place, test it out to ensure the plan works long before it's needed. Teel and Moraton agree that one of the simplest ways to do that is with a tabletop exercise. Sit around a conference table with your staff and walk through several disaster scenarios, verbally describing the actions that individual departments and staff will take before, during, and after an event.

"A tabletop exercise will help you understand the implications of a given event, address any holes in your plan, and react more quickly should that event occur," concludes Teel, who says the final step is sharing your plan and revising it on an annual basis. "A lot of organizations say their employees are their most valuable asset, but, if they don't know what to do during a disaster, they can become your biggest liability. So, make sure you share your plan across your organization."

For more help on creating a plan to protect your business, review our disaster preparedness plan checklist.