Small Business Disaster Planning & Preparation: A Beginner’s Guide

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small business disaster recovery plan

Small business owners can control what they sell, whom they hire, and how they do business. Having the power to make decisions is one of the reasons many business owners like running the show, rather than working for someone else. All that still doesn’t give owners power over outside events. Natural disasters, pandemics, financial crises, and unforeseen circumstances—from the death of a partner to the collapse of a major client—do happen. Preparing for the unforeseeable may be harder than setting aside cash for more predictable setbacks, but small business owners should still make a point of creating a plan of action for when disaster strikes. Keep reading to learn more about how to create a small business disaster plan, and how to put it into practice after disaster strikes. 

Why do I need a small business disaster plan? 

Hope is a deterrent for planning for the worst. Small business owners are often optimistic; by definition, that means they may not entertain the possibility of bad outcomes. These sunny expectations can help with building a business, overcoming daily problems, and fostering a can-do attitude. But the same feeling can be disastrous if it means that forecasts are not accounting for potential breakdowns along the way.

And when you’re optimistic and strapped for time, you may put off your preparations for unforeseen circumstances. Many owners often neglect small business disaster preparedness because they’re busy focused on growing their organization. But they do so to their detriment.

This is where a small business disaster recovery plan can be helpful. While putting one together can take some effort, it will save you a lot of time down the road if disaster strikes. Your emergency plan will outline the steps your small business needs to take in the event of an unforeseen circumstance to keep things running as smoothly as possible. 

How do I make a small business disaster recovery plan?

You can make a plan even without knowing the exact nature of the disaster that may befall you. Consider the basic line-up—natural disasters, the death or serious illness of a partner, or a financial crisis—and set aside some time to mitigate the main negative effects of each.

First, look into getting the right insurance package. If you’re in a low-lying area, you’ll want to sign up for flood insurance; if your region suffers extreme winter, coverage for hail, snow, and freezing temperatures is what you’ll need. Business interruption insurance is an add-on that can compensate you for lost income if physical damage prevents you from continuing business as normal. For more information on some of the different types of business insurance, check out: “Risks Small Businesses Face and How to Avoid Them.”

Then, set up a plan for communicating with employees and customers in the case of a disaster. You might even draft a sample fill-in-the-blank email that will help you disseminate important information so you don’t have to compose notes in a panic. As a best practice, you should have a customer and employee email contact list ready to go so you can communicate with both groups as needed. 

Next, make sure you are regularly backing up all important data and keep copies of files outside your physical office. Update your backups quarterly, if not more. Depending on what type of business you run, you may want to have a remote work plan in place for employees to ensure that work can switch to remote if needed. Check out this guide from Harvard Business Review on how to get an emergency remote work plan in place. 

Finally, if you have a business partner, find a time to sit down a discuss a succession plan, in the case of an emergency. Make sure you both know how to access key business services and accounts. 

Once you’ve put your small business emergency plan in writing, drafted some emails, and signed up for insurance, you can file your preparations away, so that sad possibilities don’t derail your daily work or sunny demeanor.

How to put a small business emergency plan into practice 

When an unexpected episode then occurs and is big enough to take a toll on the markets or our industry, we are almost always unprepared. By taking the steps above, you’ll have a better chance at resiliency. After a disaster happens, follow the plans you set up. Employees will look to a strong leader in this time, so you’ll want to put on a brave face and communicate clearly, even if you’re anxious about the damage.

As you rebuild, financing may help you get back on your feet. The Small Business Administration (SBA), for example, has an Economic Injury Disaster Loan program specifically intended to help small businesses affected by disasters. SBA disaster loans are available to businesses with less than 500 employees who are located in a state that is experiencing a declared disaster. A declared disaster means your state has declared to be in a state of emergency. This designation is commonly used for states experiencing flooding, hurricanes, tornadoes, or other adverse weather events.

Loans of up to $2 million are available to businesses, with terms of up to 30 years. The amount your business is eligible for depends upon a variety of factors, including loss in revenue, payroll costs, and rent payments. Learn more about SBA disaster loans in our guide.

Depending on your specific situation, the SBA may have other financing programs available for your small business. For example, to assist small businesses impacted by COVID-19, the SBA offers Paycheck Protection Program loans. Check out our guide to learn more about Paycheck Protection Program loans.

Whenever a situation is out of your control, it’s tempting to sit back—or even hide—and wait for all the trouble to disappear. But as a business owner, your company will have a better shot at surviving and thriving if you accelerate through the curves, like a race car driver.

Unfortunate events will probably transpire during your tenure as an owner, but they only develop into really bad outcomes if you allow them. Instead of wallowing in an unfortunate status quo, gather your wits and see how to make the best of a situation. Consider offering new products or tweaking your service to respond to a changing reality.

For example, if you’re planning to reopen your business post-coronavirus shutdowns, you may need to adjust your business hours, staffing, product offering, or the layout of your business location. Check out our guide to reopening your small business for more information.

You may not know what type of disaster will strike, but still, it pays to be prepared for what you cannot predict by making a plan. Fortunately, once the plan is in place, you can simply go back to being optimistic.

OnDeck is here to support small businesses – check out our COVID-19 Resource Hub for more helpful information for small businesses impacted by COVID-19.