Damaged businesses shut doors

Only about 43% of small businesses closed during the recent spate of hurricanes will reopen, research shows.

BY SUSAN KIM | WASHINGTON, D.C. | September 30, 2004



"I know one landscaper in Massachusetts who has positioned himself to be able to help his town with replanting."

—Diana McClure


Only about 43% of small businesses closed during the recent spate of hurricanes will reopen, research shows.

Why the grim number? Because 90% of small businesses don't have business continuity plans, said experts.

And the buzz phrase "business continuity" doesn't just mean preserving computer data and having adequate insurance. It means thinking creatively about your post-disaster customer base - or lack of one.

Across the southeast, there are flood-soaked Mom-and-Pop restaurants, crushed landscaping sheds, damaged franchises - it's obvious that small businesses have taken a huge hit this hurricane season.

And it's the businesses owners who are thinking creatively that are squeaking by right now, said Diana McClure, director of public safety strategies for the Institute for Business & Home Safety (IBHS).

The 2000 U.S. Census shows 75% of all Florida's business establishments have fewer than 20 employees.

"In Florida, for example, it's possible that the demand for high-end landscaping businesses could have stopped after the hurricanes hit," said McClure. Hotel properties, amusement parks, golf courses, and other service or tourist locations that hired landscapers may not be using those services - at least temporarily.

"But even small landscaping companies have the trucks and equipment to help with debris removal," said McClure.

McClure suggested that landscapers planning ahead for disasters establish relationships with local officials, such as a conservation commission. "I know one landscaper in Massachusetts who has positioned himself to be able to help his town with replanting," she said.

The bottom line is that, when it comes to disasters, business owners need to think ahead. Because even adequately insured businesses with no structural damage are at high risk for going under. "Your customer base is gone or is moving away," explained McClure. "Or you're selling services or goods that people - at least for the time being - don't need."

Business in video stores, for example, would likely be at a complete standstill during power outages because people without power simply don't rent videos. In Florida, some people have been without power for weeks now.

Chain video stores - and other franchises - might be able to fall back on national coffers, but businesses on their own need to pre-plan, or the odds will be stacked against them, said George Haddow, a former Federal Emergency Management Agency official turned consultant.

"You need to look at how to provide protection for your business when disaster strikes," said Haddow. That means, of course, getting insurance for both structure and contents of your business. But it also means thinking about how you'll market your product or service in a post-disaster situation.

"That means you need to examine vendor streams and financial streams," he said. "It's difficult to get prepared but it pays off tomorrow."

To help small businesses get ready, more than 40 partner organizations and supporters from the private sector have launched the Global Partnership for Preparedness, a nonprofit foundation that will focus on creating industry standards and sharing best practices.

The partnership's first effort - a Small Business Preparedness Campaign - is unfolding in three pilot programs, one in Charlotte County, Fla., a second in Charlotte, N.C., and a third in Los Angeles.

In Charlotte County, Fla., the Global Partnership for Preparedness worked with local and regional economic development officials to set up a small business assistance center. "We were excited to be able to assist more than 200 small business owners over the course of three days," said John Copenhaver, president of the partnership. "However, though disaster response is critical, disaster preparedness in the form of business continuity planning is what it will take to keep small businesses strong in the face of disaster."

The partnership plans to provide more than 16,000 hours of pro bono certified business continuity planning expertise to small businesses that otherwise could not afford to put such plans in place.

The pilot program in North Carolina - still getting started - will offer practical tips that will potentially help a business that has one person, or one that has 500 employees. For small businesses, "a disaster is not necessarily a major storm or earthquake," said David Shimberg, chair of the Contingency Planning Association of the Carolinas, "but may be as mundane as a broken water pipe on the floor above a business location, or a fire from an appliance left turned on next door."

About one in five small businesses suffer some kind of major disruption - whether from a large-scale disaster or localized mishap - every year.

Within the three pilot programs, IBHS will debut and test a "disaster planning tool kit" for small business owners. The toolkit will offer tips and worksheets that help small businesses identify natural hazards they may face, protect employees, protect buildings and contents, and help resume essential operations.

The tool kit will also provide details on protecting buildings and inventory from power outages, earthquakes, windstorms, hailstorms, floods, freezing and bursting pipes, and wildfires.

Keeping small businesses alive in the wake of disasters is more important than many people realize, agreed members of the Global Partnership for Preparedness, who gathered in Washington, D.C., for a kickoff meeting on Wednesday. Small businesses employ half of all private sector employees and disburse 44.3% of the total U.S. private payroll. And, of the 23.7 million businesses registered with the Internal Revenue Service, 99.7% have between zero and 500 employees - the widely recognized classification for a small business.


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