Do you have business interruption insurance? Does your policy cover flood, fire, theft? Are your machines and equipment covered? Do you have coverage for key employees?
When a fire destroyed our warehouse about a month ago, we suffered a total loss. But we’ve been able to bounce back fairly quickly because of the steps we had taken to be prepared for a disaster. During the recovery process, we’ve learned some important lessons that we’d like to pass along to other small business owners. Here’s a run-down of the most important points that any small business owner should make sure to cover:
#1: Have a disaster recovery plan in place, and go over it often.
Everyone should have a disaster recovery plan in place. Make a checklist that you would run through in caseof an unexpected event, and make sure it’s backed up offsite so that you can access it immediately after something happens. Run through your checklist every so often — it would be best to schedule a dry run several times a year. Have a different plan for several different scenarios laid out, like fire, flood, and theft. Make sure your employees are involved in the testing process so they understand what to do in case of an unexpected event.
#2: Make sure your data is backed up
Off-site data backup is extremely important. It can help avoid a complete loss of the important data stored in your on-site servers or computers should anything happen. Be sure that your off-site data storage includes contact information for your clients, employees, suppliers, and anyone else who is essential for the day-to-day operation of your business. It’s also good practice to have your employees’ emergency contact information stored offsite.
Make sure you have a duplicate of your tax returns saved somewhere — it’s a good idea to scan them and save them to a cloud-based system like Google Drive or DropBox and to have a copy on a hard drive offsite. This way, you would have a list of all your assets handy when the insurance company needs it.
Store copies of your insurance policy and disaster recovery plan offsite. Also make sure to have payroll, inventory lists, billing records, pictures of your equipment and inventory, and tax information stored offsite. If you have a website with a lot of content, it’s extremely important to back it up as well.
It’s ideal to have a system that updates your company files every night. Make sure you have IT professionals involved in your testing phase.
About a month before the fire broke out, Joe Glavin, PFS Owner, ran through the disaster recovery system to make sure everything was in working order. Joe explains our off-site disaster recovery system, which really saved us a lot of trouble because our servers were destroyed in the fire:
“Our data was backed up and stored on a hard drive offsite. Taped to the side of the computer were captured screenshots and captions on printed pages. These screenshots were to be followed for full reboot and recovery of our database as of the last backup (which was every night). Our first dry run was successful but some of the screenshots were not in the correct order or lacked the necessary detailed info for a proper download of the data. One of our IT professionals reworked the directions and the next reboot was successful. All in all the process was painless and effective. It was comforting to know that when we actually had to do a full scale real life recovery we didn’t have to cross our fingers and hope that the info was there.”
#3: Be aware of what you possess and its value
According to Sean Deviney, Vice President of the Body-Borneman Association, one of the most important things a small business owner can do is to insure their building, inventory, and equipment to value. Don’t take any shortcuts with this — find out the actual cash value of your equipment rather than merely estimating its value.
If you underestimate the value of something that gets destroyed or stolen, you risk ending up with an inadequate payout from your insurance. If you have office space, take videos or pictures of the interior every so often, as it’s hard to remember what was truly lost, especially when you’re still in shock. If you’re a contractor, it might be a good idea to take a picture of the interior of your van or truck every day or so.
#4: Try your best to spot gaps in your coverage
Certain things are very easy for a small business owner to overlook, especially when it comes to insurance. Make sure to be aware of any possible gaps you have in your coverage and correct them ASAP.
Make sure you trust and have faith in your insurance agent. It’s also important to make sure your agent is a specialist in the area he or she is covering. They should be familiar with covering businesses of your size and industry, and make sure they offer all the products you need.
When an insurance agent asks to come visit you to go over your policy, Sean Deviney says to let them come out to go over the details of your coverage. He says it’s a good idea to go over your insurance policy twice a year to catch any possible gaps.
You should also consider taking out an umbrella policy for additional liability coverage. This will help make sure you’re protected for anything that your standard insurance can’t cover. The umbrella policy kicks in if you go over the limits of your standard insurance. Make sure that your business income is insured. Most policies will cover your income up to 12 months if you were to suffer a total loss. Also, have your attorney read your property lease. This could make the difference between being paid or not.
#5: If disaster strikes, take action immediately
“Call the police and then call the agent. Don’t wait for the insurance company to come out and fix your stuff — just fix it. While you wait for the insurance company to send an adjuster out,more damage can happen,” Sean says.
#6: Have a temporary space lined up
You might want to consider setting up a contract with a partner, vendor, or facilities manager in which they would allow you to set up a temporary office in exchange for a daily fee. Should disaster strike, it’s extremely important to have a place where you can deal with your insurance company, meet with your employees, reroute shipments, and recover your data while you search for a replacement building. Be aware that if you’re operating out of an older building your insurance company will most likely pay you the actual cash value or depreciated cost of your building as opposed to a full replacement cost.
Ultimately, there are always bound to be little gaps in your coverage here and there. “It’s impossible to always cover every little thing,” says Sean.
But if you’re adequately prepared for a worst-case scenario, you can decrease your downtime after a disaster and significantly reduce the impact of the loss. To best prepare yourself, document your assets religiously, make sure that your insurance covers most any situation, and back up every important document and piece of data in a safe, offsite location.
Click here to read the other parts of our “Lessons Learned” series.