business.com receives compensation from some of the companies listed on this page. Advertising Disclosure

Home

Preparing Your Business Should the Worst Happen

Jennifer Dublino
Jennifer Dublino
business.com Contributing Writer
Updated Aug 02, 2022

Don't be caught off guard. Here are 11 tips to help you prepare for a potential disaster.

No one likes to think about what could go wrong, but you can’t ignore the risk when you run your own business. Chances are, every business, at one point or another, will face unexpected challenges, difficulties or even disasters. What matters is that you’re ready to deal with them.

How can businesses prepare for unforeseen challenges? It’s impossible to think of and deal with every potential business threat. Still, you can take steps to protect yourself and your business from the financial, natural or human difficulties that could arise. 

What could happen to my business?

Unforeseen disasters are, by definition, unexpected. However, the more you consider every possibility in advance, the less likely you are to be taken by surprise. Take the time to think about what could go wrong, and prepare a risk-management plan that outlines how you’ll deal with each possibility. 

The more prepared you are, the better you’ll be able to respond and keep your business safe and secure. Here are some of the scenarios to think about:

  • Natural disaster. Consider what would happen in the event of a natural disaster, such as a hurricane, tornado, earthquake, wildfire or flood.
  • Crisis. Unexpected crises can include a terrorism attack, mass shooting, riot or lockdown in your area.
  • Loss of a crucial person. The sudden death or loss of a key senior executive, either yourself or someone else, can be disastrous.
  • Theft. Theft of your vital business data could occur through cybercrime or other nefarious actions.
  • Scandal. A scandal or social media crisis could ruin your business’s reputation.
  • Equipment failure. An equipment failure, such as tech system issues, a plumbing failure, power outage, or other event could leave you unable to use your business equipment or premises.
  • Lawsuit. An expensive lawsuit could hurt your business financially and cause operations to cease.
  • Financial disaster. You could experience a financial disaster somewhere in the supply chain distribution that leaves you waiting indefinitely for payment from your clients.
  • Disruption. A strike, shutdown, shipping disruption or natural disaster in the region that produces your goods could leave you stranded without your product.

FYIFYI: When disaster strikes, communication is key. Customer communication and internal communication are crucial, and so is communicating with vendors, your insurance company, relevant government entities and nonprofit organizations.

How to prepare your business for the worst

It’s impossible to prepare for everything, but here are 11 proactive steps to protect your business against the most likely scenarios.

1. Assess your business’s risk factors.

The first step is to consider everything that could go wrong in your business, including natural disasters. Consider the following questions: 

  • Is your business located in an earthquake or hurricane zone? 
  • Are you close to an area susceptible to wildfires or floods? 
  • Do you deal in highly perishable goods? 
  • Is your equipment well-maintained? 
  • Does your business use confidential data that could cause damage if it were leaked or compromised in any way?

2. Analyze essential business functions. 

Although all your business functions are important, some are non-negotiable. Determine the vital roles or tasks that must continue to keep your business on its feet – and which can be allowed to fall by the wayside for a short period.

3. Prepare your emergency response. 

Ensuring workplace safety means buying and maintaining safety equipment, marking emergency escape routes, and planning your immediate response in the case of fire, flood, lockdown, power failure or other potential disaster. Rehearse your emergency response plan with your entire staff once or twice a year.

Did you know?Did you know? Any employee injury suffered on your premises could be filed as a workers’ compensation claim.

4. Back up everything. 

Since your business data and processes are likely digitized, you should never rely on just one server or copy of your most important documents and information. Back up vital data to cloud storage with fortified cloud encryption and diversify your server locations (if relevant). 

You don’t want to lose all your business information if there’s a regional power outage or a flood wipes out the local servers. 

TipTip: To learn more about cloud storage features, benefits, and prices, check out our reviews of the best cloud storage and online backup services.

5. Don’t rely on individual people. 

Suppose only one person knows all the passwords or how to access the emergency internet server. If they’re not present, the whole business will fall apart. 

Ensure at least two people know every password. Try to have at least one other trusted person who knows how to perform the vital elements of another employee’s crucial role. If that’s impossible, at least ensure your most critical business processes are fully documented so someone else can take over in a pinch.

6. Get the right insurance for your business.

Good business insurance coverage isn’t just about buying enough insurance; it’s about choosing the right business insurance policies for your business needs. 

Ensure your general liability insurance policy is robust, and consider specialty insurance like specific disaster coverage, cyber liability insurance, or equipment insurance. Consult an insurance provider that’s experienced in providing policies for small businesses.

TipTip: To find the most comprehensive business insurance for your organization, check out our picks for the best business insurance providers.

7. Create an emergency fund. 

Your emergency fund should be enough to cover your core business expenses for six months. This gives you a safety net if your cash flow encounters a snag or a hurricane hits your office.

8. Maintain up-to-date contact information. 

Whether you need to get in touch with your team at midnight to tell everyone not to come to work the next day or you need to ensure everybody got home safely after a massive storm, you must be able to contact all your employees at any time. 

Keep your records up to date and accessible even if the internet is down, you’re stuck on a train, or you have to evacuate the building.

TipTip: Use Google Person Finder or the Red Cross Safe and Well app to check on your family and employees after a disaster.

9. Plan for remote communication. 

Establish remote working capabilities and secure, reliable ways to communicate with all your employees. Setting up a remote work plan and communication channels long in advance ensures you’ll keep the business running even if all your employees are geographically scattered or can’t come into the office.

10. Set up a disaster chain of command. 

Nothing makes a difficult situation worse than a lack of leadership. Everyone should know who to contact if something goes wrong and who makes decisions in an emergency. A clear chain of command prevents a crisis from turning into a catastrophe. 

11. Know what resources you can draw on. 

Investigate the municipal, state or federal resources available for businesses after a natural or financial disaster. Resources can include the following:

  • State-wide disaster-recovery funds

  • State benefits, such as unemployment benefits for your workers while your business is closed
  • Low-interest loans from the SBA for property damage after a natural disaster.

Did you know?Did you know? The U.S. Small Business Administration (SBA) offers low-interest loans and other resources to businesses affected by a disaster. You can call the SBA at 1-800-659-2955 (TTY: 1-800-877-8339) or email disastercustomerservice@sba.gov.

How to handle a disaster when it happens

When disaster hits, respond immediately with the following steps: 

  1. Don’t panic. This is why you prioritized disaster preparedness and made a plan.
  2. Assess the damage. Assess the damage and perform any immediate repairs possible to prevent further damage. This may involve temporary measures like nailing plywood over smashed windows or covering damaged roofs with tarps. 
  3. Find a backup work location. Decide if a backup location is needed. If so, arrange for one. Alternatively, decide that employees can work from home until the office is repaired or relocated.
  4. Recover what you can. Recover surviving equipment, inventory, paperwork and other items from the damaged office.
  5. Contact employees. Check in with employees to ensure they’re OK. Provide employees with physical and mental health support and assistance as needed. 
  6. Communicate your plan. Let employees, vendors and customers know about your workplace status and plan for resuming work (where and when) after the disaster.
  7. Restore your data. Restore your company data from your backup drives or cloud storage system.
  8. Look at your finances. Take stock of your financial resources and determine whether or not you need to apply for a disaster loan.
  9. Assess order fulfillment. If you have outstanding customer orders, reach out to the customers regarding order fulfillment delays. Convey your policy about order cancellation and refunds, given the situation.
  10. Contact your insurance company and make a claim. This may include damage to your facility, equipment, furniture and inventory, as well as lost income.
  11. Get help. Contact government entities, nonprofits and other organizations that can help you recover.
  12. Create a recovery plan. Your recovery plan will include how much money it will take to get the company operational and back to pre-disaster levels. It should include repairs, replacement of damaged goods, and marketing costs. Present this plan to lenders and nonprofits distributing disaster-recovery business grants.

Evyatar Sagie contributed to the writing and reporting in this article. 

Image Credit:

Petrov Stanislav/Shutterstock

Jennifer Dublino
Jennifer Dublino
business.com Contributing Writer
Jennifer Dublino is a prolific researcher, writer, and editor, specializing in topical, engaging, and informative content. She has written numerous e-books, slideshows, websites, landing pages, sales pages, email campaigns, blog posts, press releases and thought leadership articles. Topics include consumer financial services, home buying and finance, general business topics, health and wellness, neuroscience and neuromarketing, and B2B industrial products.