How Small Businesses Can Prepare for the Next Natural Disaster

As we have witnessed these past two months, Hurricanes Harvey, Irma and Maria devastated many parts of the south coast and the economies of Texas, Florida and Puerto Rico. The damage from the storms is expected to halt U.S. GDP by an entire percent. Recent estimates put the costs of recovery at around $85 billion and $59 billion for Harvey and Irma respectively.

While larger businesses have the resources to rebuild and recover, many smaller businesses do not. They will likely struggle to account for the cost of repairs, and even lose their companies in the process. According to FEMA, nearly four in 10 small businesses struck by a natural disaster are forced to permanently shut down. With more storms expected in the coming weeks as hurricane season persists through November, it is vital that small business owners prepare in the meantime.

The first step for any small business is to prepare internally. Here are three best practices that small-business owners can adopt to prepare for a future hurricane or any other natural disaster.

  1. Establish a recovery plan: Often, disaster recovery plans fall to the bottom of small-business owners’ to-do lists, especially if their business is located in an area that doesn’t typically experience high-risk weather. However, no business is immune from a harmful storm’s impact. So disaster preparedness starts with a formal plan that’s comprehensive and allows the company to quickly restore its normal operations following an emergency.
  2. Discuss your plan with all employees: It is crucial for your entire staff to be on the same page when it comes to what your disaster plan involves in order for it to be effective. So once small-business owners have a plan in place, they need to ensure that their employees know what’s included and what their responsibilities are should a natural disaster strike. Owners can share this information by emailing a copy to all employees and discussing the plan in detail at the next all-hands meeting.
  3. Back up your business’s data: Small-business owners should ensure their data is backed up both virtually and physically in a secure location. Doing so can prevent a natural disaster from turning into an even worse data loss debacle.

While following these steps can get small businesses on the right track toward hurricane preparedness, no company can be fully protected without insurance. With a plan in place, the next step is finding the right hurricane insurance plan. But there is often confusion over what proper hurricane coverage looks like.

Small businesses should take into account the specific rules and regulations of their industry when choosing an insurance plan to protect against hurricanes and other natural disasters. That said, there are two policies that are essential to businesses that need a defense against hurricanes.

Commercial Property Insurance is a policy that helps cover some of the cost to repair damages or restore your business property should a natural disaster cause harm. It is important to note, however, that many commercial property insurance policies only protect damages caused by hurricane winds, not flood damage resulting from rising water. If your business is located in an area prone to hurricanes, ask your insurance provider about “riders” (also known as endorsements), which can be added to your policy for more complete coverage.

Business Interruption Insurance is a policy that helps companies deal with the extended time (and business) they may lose as a result of hurricane damage. Often, this forced, lengthy pause in operations is what causes small businesses to permanently close, due to the high costs they incur and their inability to generate the revenue required to cover those costs. Business interruption insurance helps small businesses through by providing the funds for necessities such as taxes, loan payments, rent and salaries. Again, it is key to ask your provider exactly what a policy covers before purchasing it. Typically, business interruption insurance only protects your business if the circumstance that forced you to shut down is already covered by your commercial property policy.

This year’s Atlantic hurricane season has already been deemed the third worst on record. With more than a month to go, small businesses can ensure that they’re protected from damages through internal company policies and a thorough insurance plan. As far as hurricane insurance coverage goes, it’s crucial for businesses to do their research and find the policies that will provide the best protection. Although developing these plans will take time and effort, the risks mitigated and money saved as a result will be well worth it in the long run.

The Best and Worst States for Business, According to CEOs

For CEOs, who naturally favor “pro-growth,” low-tax states, southern states present an undeniable bastion for business, according to Chief Executive magazine’s 2015 “Best and Worst States for Business” survey.

In this year’s survey, Texas remained the best state for business for the 11th year in row, followed by Florida, North Carolina, Tennessee and Georgia. Since the recession began in December 2007, 1.2 million net jobs have been created in Texas, while 700,000 net jobs were created in the other 49 states combined, the magazine reported. This job creation contributed toward unemployment rates 1% lower than the national average, an advantage rounded out by extremely favorable taxation and regulation, strong workforce quality, and very good marks for living environment.

Despite notably low unemployment, two of the greatest hubs for business drew particularly unfavorable marks from CEOs: California ranked last in the survey, preceded by New York. Illinois, New Jersey and Massachusetts completed the bottom five. CEOs gave these states the lowest ratings because of their high tax rates and regulatory environments. One CEO told the magazine, “The good states ask what they can do for you; the bad states ask what they can get from you.”

Compared to the 2014 rankings, Idaho has made the largest improvement, rising 10 spots to number 18, primarily due to high growth rates in GDP, while South Dakota dropped eight places, “even though quality-of-life attractions enhance the state’s low-tax bona fides,” the magazine reported.

Check out the full rankings below:

Best States for Business rankings

 

Understanding Small Business Insurance for Young Entrepreneurs

How would you like to be a billionaire by the time you’re 23? If you think that’s a dream too good to come true, think again. That’s exactly what happened to Mark Zuckerberg, creator of Facebook. While it’s true he didn’t strike it rich as a teenager, he did lay the groundwork for the massive worldwide social network while still in his teens at Harvard University.

Steve Jobs was a successful entrepreneur known for his charisma and passion, but also his uncanny ability to make decisions that resulted in success. Like Steve Jobs, successful entrepreneurs tend to break away from the molds their peers seem tied to, and do what other people said was impossible. But for every success story there’s a dozen not so happy endings. If you’re wondering what it is that sets the successful apart from the failures I’d like to suggest that it comes down to understanding and managing risk.

As a young entrepreneur, navigating all the legalities and requirements of starting a business can be mind boggling. It’s easy to get overwhelmed by what you need, what you don’t need, and how much to pay for it all. In the early stages it can seem like you’re bleeding money at an unfathomable rate, but don’t fret. This is often typical in the business world, especially for new businesses.

It’s probably safe to say we’ve all heard the saying “it takes money to make money”, but have you ever heard “it takes money to save money?” When it comes to business insurance that’s the whole truth and nothing but. Without it, you and your business are exposed to more risks than I have time to list. Some risks are easy to see, while others are not. But one thing holds true, they’re all manageable with insurance. To prove my point here’s a short list of risks insurance can help reduce.

  • Preventing Financial Loss – Burglars break in and steal, vandals destroy things without reason, Mother Nature has a temper, and accidents can happen. Preventing loss is one of the best reasons to have good insurance coverage. If a thief steals equipment or a fire damages your building, you’ll have to pay out of pocket to recover the loss if you’re uninsured. A good policy makes even the biggest losses a minor bump in the road.
  • Mitigate Liability – Running a business puts you in the liability hot seat. Without an adequate policy to protect you and your business from lawsuits you’re literally flirting with bankruptcy. The average general liability insurance plan protects against all types of liabilities that every business faces on a daily basis. Everything is covered, from customers who slip and fall on your wet floors to your damaging another person’s property.
  • Insurance Looks Good – Not only does insurance give you peace of mind, it also makes your business look good. Adequate coverage gives clients and potential customers a sense of stability and responsibility; they can trust your business to weather unexpected storms. Likewise, investors and banks like it because insurance tells them their money is in good hands. If something detrimental happens to the business, you banks and investors know you won’t default on your loans. Stabilizing your image is one effect of business insurance that most entrepreneurs don’t fully realize or take into consideration, but it’s a must for success.
  • Legal Obligations – Often times people get insurance for one reason, because it’s required. Most states have laws on the books that require certain insurance, or levels of coverage, before an individual can conduct business. As the laws vary from state to state and industry to industry you’ll want to contact an insurance agent or a small business attorney near you for more information.

Starting a business is a lot of fun, but make sure you cover your basis in the beginning. Having the right insurance will reduce your risk and make you more appealing to potential investors. I know you’re in this business because you’re passionate; so don’t risk the success of your business to save a few bucks.

Managing Small Business Risk

As any risk manager can tell you, risk knows no market segment. Large businesses with their multi-million dollar losses may get more attention but small- and medium-sized enterprises (SMEs) face risks as well. The difference for these smaller businesses is that the losses they face can’t always be absorbed into their balance sheet. Losses that would be relatively minor for their larger counterparts, could be devastating and could even force an SME to close its doors forever.

This is why, according to a survey by UK insurer Premierline Direct (part of the Allianz UK Group), it is interesting to see that despite being aware of, and having encountered, many common risks like customer non-payment, supplier issues and natural disaster losses, not all SMEs have been spurred to take action to mitigate future risk. One-fifth of UK SMEs surveyed not only do not have anyone who is responsible for managing risk, but have no plans to manage risks in the future. One-quarter do not consult with any specialists for risk management advice. Of course, the majority of SMEs do take risk management measures but closing the gap for the remaining businesses should be a priority.

To illustrate their findings and offer some tips on how SMEs can manage their risks more effectively, Premierline Direct provided the following infographic.

Infographic by Premierline Direct