Posted: February 18, 2011

The monster storm that recently paralyzed the country from Oklahoma to New England should serve as a wake-up call for all small business owners to review their business continuity plan.

All too often, when faced with a major event that could impact their operations, small business owners react in an ad hoc manner that exacerbates their difficulties.

Successful business owners understand the critical importance of disaster planning. It is not a onetime undertaking, but rather a dynamic ongoing process that changes along with the marketplace and the business itself.

While every situation cannot be anticipated, small business owners should consider these five fundamental items when making their business continuity plan:

• To what risks is the business exposed?It is critical that an accurate assessment be undertaken and then updated as the situation changes. Consider the three most important resources your business has:

  Human resources: your employees, customers and suppliers. What is the impact that the loss of any one or all three of these would have on your business?

  Physical resources: the entire infrastructure associated with your business. Included here are location, inventory, communications and transportation.

  Business continuity: what will the owner do should an event take place? How will he or she contact key employees, suppliers and customers? What will the business operating environment be like following the event?

• What kinds of potential losses could I suffer? These can be segmented into upstream and downstream losses. Upstream losses are those suffered when a business' suppliers are impacted by a disaster. Consider the cancellation of all flights in the area affected by the current storm as an example. Downstream losses are those suffered when the business's customer base is impacted. In either case, cash flow will be impacted, possibly severely. How will the business survive?
• What equipment or information is vital to your business's operation? Small business owners need to look at continued access to vital records and information. Is this data available at a secure, off-site location? Is it routinely backed-up and can it be accessed quickly and easily? What equipment, vehicles or other machinery is needed to keep the business functioning?
• What about payroll continuity? Does the business have a policy concerning direct deposits and overtime pay during the disaster, or any sort of contingency pay to assist employees during the disaster? Are funds available to cover these expenses?
• How adequate is the business's insurance coverage? What are the policy's limits and what events are covered and not covered? How long will it take to receive payments following a disastrous event?

  Planning for disasters now will enable a small business owner to respond in an efficient and cost-effective manner and will provide a tremendous return on investment for the time dedicated to this effort. There are way too many truisms attesting to the need to be prepared. Small business owners ignore them at their peril and their company's survival.

  Jim Carroll is the vice president of small business for the Hampton Roads Chamber of Commerce and executive director of the Hampton Roads Small Business Development Center. He can be reached at 664-2595 or www.hrsbdc.org.