How Small Businesses can Recover from Disaster and Disruption
For small business owners, planning for the unexpected frequently takes a backseat to the daily challenges of running a business. It's easy to put off preparing for a crisis or disaster that may never come. This is often why small business suffer setbacks after a disaster, with 40% of businesses unable to reopen, and another 25% close a year after disaster.
Whether it's a natural disaster, economic downturn, or fluctuating tariffs, there are ways that small business owners can plan ahead to overcome disruptions and get back to work.
In the absence of an existing plan, here are six steps to take on day one of recovery.
Assess the Damage
Take a look around and assess what’s working and what’s not. If it was a physical disaster, are there hazards that need to be removed? If it's a financial disruption like tariffs, how much will it impact your bottom line? Or in the case of a cybersecurity attack, what systems are still up and running and which ones have been compromised?
It’s not yet time to determine how the damage can be rectified; just take detailed notes of what is no longer operational, accessible, or usable.
Document the Situation
In the case of natural disasters, as you’re surveying your business, take plenty of photos and videos of the aftermath. Capture proof as quickly as possible, in case the situation deteriorates or emergency crews begin recovery work.
If the disruption you’ve experienced was more economic than physical, take note of what triggered the downturn and the impact on your business. Did tariffs cause businesses in other countries to cancel orders? Did the cost of raw materials become too high to be profitable? What happened and why? Determine how long the situation is likely to last.
Secure Your Property
Gathering evidence of the extent of the physical damage is critical for insurance claims. Once you've done that, take steps to protect your space from further damage or disruption. That might include boarding up broken windows, turning off electricity or water, putting a tarp over your roof, or installing new locks—what may be needed depends on the damage you’ve experienced.
Economic disruption may require bookkeeping documentation and/or receipts to prove the negative impact on your finances.
Do what you can to prevent further loss.
Notify Insurance
After you’ve documented the damage, contact your insurance carrier to file a claim. You may need to review your policies to understand what is covered and what is not.
In addition to property insurance, if you had business interruption insurance, you’ll want to get that processed, since that type of insurance provides coverage when your business cannot operate or generate revenue. For tariff-related disruption, specialized policies such as trade disruption or trade credit insurance could apply, as well as political risk and cargo insurance.
Communicate Your Situation
Get in touch with your employees, customers, and suppliers to let them know the situation. Even if you’re unsure how to move forward following a disaster, fill your community members in on what took place and how the business has been impacted.
Are you raising prices? Will you close your doors for weeks, will you be open limited hours, or are you relocating temporarily? People who support your business want to know what to expect; keep them informed as you have new information.
Request extended payment terms from suppliers if needed, or a pause in loan repayments while the business is out of commission.
Keeping the lines of communication open as you process and begin to recover from a disaster will help reduce the impact on your business will help others know how they can support you.
Explore Disaster Relief Programs
If costly repairs or replacement will be needed, identify local, state, and national emergency response programs that may have grants or loans available.
The Small Business Administration (SBA) has an Economic Injury Disaster Relief program for small businesses located in towns or cities that have officially been deemed disaster areas.
If you operate a farm that has been impacted by natural disasters such as flood, drought, fire, or tornado, to name a few conditions, the Farm Service Agency’s Emergency Farm Loan program may be able to help.
There may be federal tax relief available through the Federal Emergency Management Agency if your area was officially declared a disaster. Check to see what kind of tax relief or abatement may be available if you qualify.
Some states, including Delaware and others, offer Self-Employment Assistance (SEA) benefits to self-employed business owners who effectively lost their jobs when their business experienced a federally declared disaster. Explore whether your state offers an SEA program.
Depending on the severity of the disruptive event, you may be able to be up and running in a matter of hours, or it could be months. Physical events may be easier to recover from than ongoing economic policies, so start to strategize the way forward, taking into account various potential outcomes. In all cases, communicate as much as possible with your community to minimize the impact on your revenue and business operations.
As your business begins to recover, consider investing time to create a disaster recovery plan based on the steps you're taking now to keep your business up and running.
