When major natural disasters like Hurricane Ike are in the news, small-business owners are reminded of just how quickly everything they've built can be swept away. But when hurricane season ends, how many do something to prepare for the next cycle of wind and rains? And while the odds of a hurricane destroying your business are low, even if you operate in a state like Florida or Louisiana, smaller and more common disasters like fire can trash your business's equipment just as easily.
There are several simple and inexpensive steps you can take that will provide basic protection for your business and its infrastructure in the case of misadventures both large and small. For starters, it's not just your computers or machinery that a disaster can wreck. Ultimately, it's the bottom line that suffers. "People are programmed to think about insurance for physical loss, but they don't think about protection against lost revenue," says Donna Childs, author of Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery for Small Businesses. She says she's surprised at how many small firms don't buy business interruption insurance. It's an addition to property insurance that covers your enterprise for the revenue it would have made when an unfortunate event makes it impossible to keep operating. That means the burden is on you to keep good business records off-site. You'll need to show them to the insurance company to prove what your usual revenue would have been. One big upside is that the premium—which generally adds roughly 10 percent to your property insurance bill, Childs says—is deductible as a business expense.
Dennis Meehan has run Meehans' Office Products in Melbourne, Fla., since 1959. Melbourne was one of the towns hardest hit last month by rain from Tropical Storm Fay, but for Meehan it was just one of many storms he has weathered over the years. He continues to maintain his business interruption insurance despite never having been significantly damaged by one of these storms. He figures it's worth it. "The employees that are here—I don't want to lose them if something drastic happens," Meehan says of his decision.
Data loss. One type of business interruption insurance is service interruption insurance. Such a policy covers a home-based service business—say an online entrepreneur who loses power for an extended period of time and is unable to work. One of the costliest parts of your business to replace after a disaster is your computer data. What many business owners often don't realize, however, is that the aftereffects of a natural disaster—not the event itself—can be the real calamity for their computer system.
Jim Howes runs Data Doctors, a computer service in Melbourne. After Fay struck, he says, customers were coming in with blown-out computers ruined not by the storm itself but by power failures and surges. Howes says that none of these customers had invested in a simple battery backup, which connects to a USB port and can save your files in the event of a power problem. Howes says that, for a desktop computer, you should get a battery backup of no less than 375 volt-amps (which can be bought new for less than $50) and, for a server, no less than 1,000 VA (at a cost of less than $200).
Even with a backup battery, there's still the matter of backing up your files. If you have a lot of data, using a storage service can be costly. "It's not unusual to see a business paying $100 a month," Howes says. It might be a smarter move to do it yourself—if you do it right, of course. Meehan saves his essential files on tapes, which every night he places in a fireproof container that's secure inside a fireproof cabinet (giving two hours of fire protection). An annoying nightly routine? Maybe. But it pays off handsomely in peace of mind.
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