Preparing for the Worst: 6 Ways to Reduce Your Disaster Risk

By Evyatar Sagie, writer
Dec 19, 2018
Image Credit: garagestock/Shutterstock

From floods to financial dilemmas, here are some steps you can take to be better prepared.

You know that there's no shortage of risks your business faces. While it may be hard to predict what your business may have to deal with, whether it's a natural disaster or a financial dilemma, there are steps you can take to ensure you're better prepared to deal with a crisis if and when it strikes.

Here are six potential challenges that could rock your business and how to prepare for each one.

1. A natural disaster

Much of the U.S. is at risk of harmful events such as earthquakes, wildfires, tornadoes, hurricanes or floods. You can't do much to prevent one from occurring, but you can reduce the impact it has on your business. If your office is flooded, your computer systems fried by a freak storm or your whole community is turned upside down by an earthquake, you'll need to get your business back on its feet as soon as possible.

How to prepare

The most important step to prepare for a natural disaster is to follow local advice for maintaining a safe work environment. That includes keeping key emergency safety equipment, like a fire escape ladder, and creating an emergency response plan for potential disasters. You'll need up-to-date records of all your employees' contact information to communicate news. It's also important to back up all vital business data, in case your IT systems or local servers are damaged for any reason.

2. A slow month (or more)

The most common risk of being self-employed is that you don't have the reassurance of a regular monthly paycheck. If you have a slow month because, for instance, all your regular clients are on vacation, you could miss out on significant income that you were relying on to pay your rent and cover your bills.

How to prepare

Every business should have a savings cushion, equal to at least six months of operating costs so that you can wait until your clients return from vacation and business picks up again. You should also figure out when your slow season might be – is it August? December? There are no universal rules for this, as it can vary per business type, but by planning ahead, you can at least have some financial wiggle room.

3. A disastrous lawsuit

Depending on your business, you could face the possibility of being sued by a disgruntled client. For example, a personal trainer could be accused of inappropriately touching a client, or a photographer might face claims of having invaded someone's privacy by sharing photos without permission. Dealing with a lawsuit could cost you thousands of dollars. You may even lose your entire business if your reputation is destroyed.

How to prepare

Even if you have good professional liability insurance, you may still need to ask your clients to sign a waiver of liability form, or even a waiver specific to your particular field, such as a personal trainer waiver. This is a form that declares that the client won't hold you liable for any incidents that could occur during your work so as to protect you from surprise lawsuits.

4. Equipment failure or theft

Most businesses rely on their tools, machinery and equipment to keep operations going. If an electrical fire destroyed your computers, or your expensive tools were stolen from the back of your van, could your business handle the loss?

How to prepare

  • Invest in reliable security systems for your vehicles and premises to help prevent theft.
  • Make sure to keep your safety provisions up to date, such as fire and smoke alarms and automatic sprinkler systems.
  • Buy good equipment insurance, and consider cyber insurance. If someone does make off with your thousand-dollar camera, or a new employee accidentally fuses your entire IT system, you need to be able to replace it as soon as possible.

5. Loss of a key employee

In small businesses, each employee is important. Can your business survive if one of them has an accident or disappears suddenly? Is your office manager the only one who knows the passwords to your client information, or remembers where the insurance certificate is kept? Consider what will happen to your business if you're unable to come to work for a few days, or even a few weeks.

How to prepare

Don't create a situation where only one person carries vital business information. Make sure that at least two people know every password or use a password manager. Make sure that every key business process is fully documented so that someone else can step in if necessary.

6. Clients who don't pay

You could be working around the clock, run a super-responsible workplace and have all your insurance in place but still face income issues. You might find that your biggest client suddenly goes bankrupt and can't afford to pay their bill. Or you could have to deal with slippery clients who keep promising to pay next week. Clients who can't pay and clients who won't pay can both wreak havoc on your cash flow.

How to prepare

Ideally, you'll have a savings cushion to fall back on. But sometimes even the best-prepared business plan can face a major challenge in the face of unpaid bills. That's where working capital loans come in. Short-term business loans, invoice factoring and working capital loans are all ways for small businesses to stay afloat until clients pay up.

Editor's note: Looking for the right business loan? Fill out the below questionnaire to have our vendor partners contact you about your needs.

As Head of Acquisition at insurtech company Next Insurance, I specialize in performance-based marketing through a variety of online channels. I have worked in companies spanning the tech world, from e-commerce through to travel, personal finance, and insurance. With skills garnered in my 13+ years of experience in online marketing and growth hacking for these diverse companies, I now lead Next Insurance’s acquisition efforts to create a global brand.
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