How To Keep Your Business Afloat During A Disaster...

On Solid Ground

When A Disaster Hits, Be Prepared To Weather The Storm

by Wendy Harris

August 5, 2008 -- When it comes to running a successful business, Henry Coaxum didn't want to leave anything to chance. So when the New Orleans resident launched Coaxum Enterprises, a business coaching, training, and development company, in 2002, he not only crafted a solid business plan and capital reinvestment plan, he also devised a disaster plan.

When he received word that Hurricane Katrina was heading directly for New Orleans and that the mayor had called for an evacuation of the city's residents, Coaxum set his disaster plan in motion. Then the owner of three McDonald's restaurants, Coaxum contacted the crews at each location to begin shutting down and securing the buildings. Since it was a payroll week, he gave those on-duty employees cash out of his company safe and retrieved addresses and phone numbers of where they would be staying so that he could make contact with them later.

To protect company property, he had been using safety deposit boxes to store important business documents and other items. He dispersed company funds throughout multiple branches of a bank, each set in a different location. And he had transferred company financials to disk, storing copies of the disk at his home, office, and in a safety deposit box at the bank.

Coaxum felt confident that his disaster plan would help minimize any damage a hurricane would cause and help him to quickly resume business operations after the storm. But after the levees were compromised, flooding the entire city, Coaxum lost everything-all three restaurants, his home, his office training center and warehouse complex, where he stored thousands of dollars worth of inventory and equipment, and $1 million in revenue.

"I planned, but I never planned for a hurricane of that nature. So, as methodical as I thought I was, I missed out on some things that could have made recovering a little easier," says Coaxum, who has since rebuilt two of his original three restaurants and purchased five more. "I will never again have all of my resources in one geographical area. It will be dispersed across the country."

Although he suffered tremendous loss, Coaxum, 57, says having a disaster plan in place helped further streamline his procedures and operations and helped him to gain insight into additional measures he would need to take should disaster strike again.

According to Diana McClure, vice president and director of business protection for the Institute for Business & Home Safety (IBHS), most small to mid-size businesses don't even have a disaster or business continuity plan in place. McClure says a business continuity plan is "a structured approach to looking at your business to identify what can go wrong and to put plans in place to reduce those risks."

Waiting could kill your business for good. According to IBHS (www.disastersafety.org), 25% of businesses that are hit by a hurricane, tornado, flood, wildfire, and even a building fire, do not reopen. Those that do resume operations struggle to stay afloat. Keep in mind that a disaster doesn't have to be a Category 3 hurricane or F-2 tornado to cripple your business. Something as localized as a hail storm or power outage can cause damage to your operation, jeopardizing its viability.

The details of a disaster plan can vary depending on the type of business and weather event you anticipate, but your plan should always do the following:

1. Protect your people: Your employees are critical to your business's survival so create an evacuation procedure that will get workers to safety before or during a storm. Establish a method of communication, which can include cell phones, text messaging, or e-mail. Have a first aid kit on hand to address any injuries that may occur. Also, make plans to meet payroll. This will foster loyalty among your staff and increase your chances of winning them back post event. Coaxum's business interruption policy allowed him to pay his key employees in the aftermath of Hurricane Katrina, but he also set up a Western Union account to wire funds to his workers. Coaxum also collaborated with other McDonald's franchisees to establish employment for some of his workers displaced by the storm.

2. Protect your property: Consider what is at risk. This can include your structure, equipment, inventory, and even your data. To protect your data, back up financial records, personnel records, and other proprietary information to disk or CD and store offsite in various locations or online. If you have a basic e-mail account, you typically have 10 megabytes of storage online. Also, consider using flash drives for portability and easy data retrieval. "In the event of a disaster now, I have a couple of small hard drives that hold a couple gigabytes of information that I can pick up in less than 15 minutes, put in my pocket, and be prepared to go," Coaxum says.

3. Contact your insurance agent immediately: Before a disaster check with your insurance agent to ensure that you have adequate disaster coverage. After the disaster, assess the damage, make notes, and take photos to show to your insurance adjuster. Coaxum spent more than $1.2 million to rebuild one of his original McDonald's locations and $1.5 million to recreate another (the third location, located within a Wal-mart has not been rebuilt). Coaxum's insurance carrier covered 70% of the costs to rebuild, and with a $999,000 disaster assistance loan from the SBA, he was able to bounce back about six months after the storm.

For more information on disaster planning, IBHS has created an "Open for Business Toolkit," that is free and downloadable at: http://www.disastersafety.org/resource/resmgr/pdfs/OpenForBusiness_new.pdf

Copyright © 2008 Earl G. Graves, Ltd. All Rights Reserved.