Issue in Brief
                        August 2006 

Disaster Planning for Small Businesses 

Many small businesses located in the Gulf Coast region suffered significant damage—even closure—in 2005 in the aftermath of hurricanes 

Katrina, Rita, & Wilma. Both business owners and policy-makers alike now realize the importance of disaster planning in ensuring business survival after natural or manmade disasters. In this Issue in Brief, the National Women’s Business Council offers information and 

resources to help business owners build contingency plans and protect their businesses from potential disasters. 

Why Consider a Disaster Plan? 

Small businesses are at the greatest risk when it comes 

to disasters because they often lack the financial resources to recover, the ability to stretch their level of 

risk across a large area, and sufficient access to multiple 

suppliers—all of which major corporations may have. 

Any small business faces the threat of disaster, whether 

it is located in a flood zone or along a fault line. Even a 

burst pipe could be fatal for a small business. And as 

September 11th revealed, no one can predict when a 

manmade disaster may also occur. 

According to the SBA, developing a disaster plan is just 

as important as developing a business plan.1 While reports vary, as many as 40% of small businesses that lack 

a contingency plan do not reopen after a major disaster 

like a flood, tornado, or earthquake.2 Investing a small 

portion of time now could be the difference between 

surviving a natural or manmade disaster and having to 

declare business closure. 

Determine What is at Risk 

One of the first steps in disaster planning for any business is to evaluate your risk. You should begin by researching which natural disasters are most common in 

your area. For instance, are you in a flood zone? You 

can check with the National Flood Insurance Program 

by going online at 

http://www.fema.gov/nfip/fmapinfo.shtm and accessing the program’s Flood Insurance Rate Maps. Other 

risks that may be common in your region are hurricanes, tornadoes, and earthquakes. A crucial step in 

determining your business’ risk involves understanding 

what your insurance policy covers, and more importantly, what it does not cover. 

According to the Institute for Business Home Safety 

(IBHS), even if your business is not physically damaged 

by disaster, there are still “upstream” and “downstream” losses to consider. Upstream losses are those 

that your business may suffer if one of your major suppliers is affected and cannot deliver goods and services 

you need. Downstream losses are those faced by customers that may prevent them from buying your goods 

and services, leading to a drop in sales and overall business.3 In disaster planning, consider what your business absolutely can not survive without. 

Developing a Master Plan 

When first approaching your disaster plan, take one 

step at a time. Look at departments one by one, designing a disaster plan for each department and then consolidating the work into one master plan. This way the 

task of building an overall disaster plan for your business will seem less daunting. The three categories of 

protection to focus on while building your business’s 

disaster plan are: 

1. human resources 

2. physical resources 

3. business operation2 

For information on what it might cost to develop your 

disaster plan, check out the chart located on the next 

page. Some recommended tips can be done at little or 

no cost. 

Emergency Planning for Employees 

As your company’s most powerful assets, your employees and their safety come first when a disaster strikes. 

Practice what you intend to do in a disaster on a 

monthly basis so that your employees are up-to-date on 

evacuation plans and what steps to follow in the event 

NWBC Disaster Planning for Small Businesses 1 
 

 

What are the Costs? 

No Cost Under $500 More than $500 

Meet with your insurance provider to 

review current coverage. 

Buy a fire extinguisher and smoke 

alarm. 

Consider additional insurance such as 

business interruption, flood, or earthquake. 

Create a list of inventory and equipment, including computer hardware and 

software, for insurance purposes. 

Set up a telephone call tree, password 

protected page on the company website, an e-mail alert, or a call-in voice 

recording to communicate with employees in an emergency. 

Purchase, install and pre-wire a generator to the buildings essential electrical 

circuits. Provide for other utility alternatives and back-up options. 

Create a list of critical business contractors and others whom you will use in an 

emergency. 

Provide first aid and CPR training to 

key co-workers. 

Consider a professional engineer to 

evaluate wind, fire or seismic resistance 

of your building. 

Create procedures to quickly evacuate 

and shelter-in-place. Practice the plans. 

Back up your records and critical data. 

Keep a copy offsite. 

Consider a security professional to 

evaluate and/or create your disaster 

preparedness and continuity plan. 

Know what kind of emergencies might 

affect your company both internally and 

externally. 

Elevate valuable inventory and electric 

machinery off the floor in case of 

flooding. 

Upgrade your building’s HVAC system 

to secure outdoor air intakes and increase filter efficiency. 

*From U.S. Department of Homeland Security’s Ready.gov web site 

of an emergency. Also, you may want to consider including disaster training in your business’s new employee orientation program(s). 

Do you have a disaster kit on site? Does it have directions on how to turn off utilities at your business’s location? To learn more about what your disaster kit 

should include, check out the emergency supplies chart 

on pg. 3. 

Cross-train your employees so they are all capable of 

carrying out tasks vital to the business’s survival in the 

days following the disaster. And last but not least, encourage employees to design a disaster plan for their 

own families. The Federal Emergency Management 

Agency (www.fema.gov) and the Department of 

Homeland Security (www.ready.gov) both offer resources that can help your employees develop their 

own plans. 

Communication 

One of the most important parts of disaster preparedness is your communications plan. You need to be able 

to communicate not only with your employees, but also 

with your suppliers and customers. When building your 

communications plan, here are some helpful components to include: 

•	 Designate an out of town number where employees can leave an “I’m okay” message if the disaster 

occurs after hours. 

•	 Assign certain employees as spokespersons for 

contacting suppliers, creditors, other employees, 

customers, media, and/or utility companies, so you 

get the word out quickly that your business is still 

available or, if not, update your business community on your rebuilding efforts.4 

•	 Take into account how your customers might be 

affected by a natural or manmade disaster and how 

long it might take them to purchase your goods 

and services again. Would additional advertising 

help in such a situation, and if so, could you afford 

to invest in an additional advertising campaign? 

Insuring Your Business 

Assess your current policy with your insurance representative. Most policies do not include flood or earthquake damage, so you may need to purchase separate 

coverage. For a list of helpful questions to ask your 

insurance agent, go to Homeland Security’s webpage at 

www.ready.gov. 

Out of all the additional insurance coverage you can 

add to your policy, flood insurance is crucial. Most of 

the 43,000 disaster loans made by the SBA after the 

2005 Gulf Coast hurricanes were for flood damage.5 

Consider business interruption insurance that could 

assist you during your rebuilding efforts. It may help 

you with paying your employees and vendors as well as 

purchasing inventory until you are up and running 

again. 

Protecting Your Records 

First and foremost, back up your data on a regular basis. According to a University of Texas study, 43% of 

companies experiencing a catastrophic data loss never 

recover, and half of them go out of business within two 

years.4 

Store extra copies of important records like maps, 

building plans, insurance polices, employee contact and 

identification information, bank account records, supNWBC Disaster Planning for Small Businesses 2 
 

 

 

 

plier and shipping contact lists, and computer back-ups 

at an alternative, off-site location. SCORE, a nonprofit association that serves as counselors to small 

businesses, recommends keeping these important records in a portable lockbox, at least 500 miles away. 

To further guarantee the protection of your data and 

reduce the need for additional paper records, consider 

creating electronic copies of essential documents and 

storing them on a zip drive or on CD-ROM to be 

stored off-site. 

Emergency Supplies Kit 

Water, if feasible, store one gallon of water per person per day, 

for drinking and sanitation. 

Food, at least a three day supply of non-perishable food 

Battery-powered radio and extra batteries 

Flashlight and extra batteries 

First Aid kit 

Whistle to signal for help 

Dust or filter masks, readily available in hardware stores, which 

are rated based on how small a particle they filter 

Moist towelettes for sanitation 

Wrench or pliers to turn off utilities 

Can opener for food 

Plastic sheeting and duck tape to “seal the room” 

Garbage bags and plastic ties for personal sanitation 

*From U.S. Department of Homeland Security’s Ready.gov web 

site 

Maintaining Business Operations 

Planning ahead for the aftermath of a disaster is just as 

important as prevention. Your business’ ability to continue operating after a disaster is dependent on many 

factors, including records, utility service, and access to 

inventory and suppliers. In developing a disaster plan 

for your business, consider asking the following questions: 

•	 Am I prepared to stay open for business, even if I 

have to relocate to a temporary location? 

•	 Do I have enough suppliers, so if one or more 

faces damage, my business operations will not suffer as well? 

•	 How will my business be affected by utility disruptions?* Have I consulted with utility providers 

about possible alternatives? And am I protected 

from power surges? 

•	 What additional costs will be faced in replacing 

inventory, machinery and equipment, furniture, and 

possibly real estate damage? 

•	 Can the business’ clientele base be broadened, so 

my business can still operate efficiently if one area 

is affected? 

•	 Do I have all the necessary materials needed to 

apply for a loan if I should need to?∗ ∗

Protecting Your Business against Pandemic Flu 

Although it is hard to imagine, the threat of a pandemic 

flu is real. If a pandemic flu were to strike, 40% of your 

workforce could be absent for as many as three to four 

months.6 In the event of an outbreak, business owners 

like yourself who will play a key role in protecting your 

employees’ health and safety as well as reducing the 

negative impact of such a disaster on the economy and 

society. Unlike natural or manmade disasters, pandemic 

flu demands a more detailed set of contingency plans— 

combined with those you hopefully already have in 

place—because it affects a much larger geographical 

area and could potentially last for months at a time. 

Thus, when building the specialized contingency plan 

for your business, make sure to address long-term absentee rates. Can your business operate over a sustained 

amount of time with only a limited workforce? Consider what effects the pandemic will have on your business operations. Will there be an increase or decrease in 

demand for your products and/or services? Will your 

business be affected by restrictions against mass gatherings? 

Take steps to educate your employees about the threat 

of a pandemic flu and the company’s plan in the event 

of a highly contagious outbreak. In addition, make sure 

to address family and medical leave with your employees and the importance of staying away from the office 

if they become ill. 

Another possibility to consider is an at-home work policy. Expand your business’s network access and security 

so your employees have the option of safely working 

from home. Lastly, talk with your insurers, health care 

planners and facilities to learn about their capabilities 

and plans should a pandemic flu occur and incorporate 

these plans into your own business contingency plan. 

Additional Resources 

http://www.sba.gov/npm2006/ 

www.ibhs.org/businessprotection 

(By filling out their Business Continuity Forms, the 

Institute for Business and Home Safety can guide you 

in developing a detailed disaster plan.) 

www.disasterinformation.org/disaster2/home/ 

(Hurricane Insurance Center) 

NWBC Disaster Planning for Small Businesses 3 
 

 

 

The National Women’s Business Council is a bi-partisan federal advisory body created to serve as an independent source of 

advice to the President, Congress and the U.S. Small Business Administration on economic issues of importance to women 

business owners. The Council’s mission is to promote bold initiatives, policies and programs designed to support women’s 

business enterprises at all stages of development in the public and private sector marketplaces—from start-up to success to 

significance. For more information about the Council, contact: National Women’s Business Council, 409 3rd Street, SW, Suite 

210, Washington, DC 20024; phone 202-205-3850; fax: 202-205-6825; e-mail: info@nwbc.gov ; Web site: www.nwbc.gov. 

1

 From the U.S. Small Business Administration (www.sba.gov/disaster_recov/prepared/getredy.html) 2

 From the American Red Cross (www.redcross.org/services/disaster/0,1082,0_606_,00.html) 3

 From the Institute for Business & Home Safety Open for Businesssm Disaster Planning Toolkit
 4

 From the U.S. Small Business Administration (www.sba.gov/npm2006.faq.html) 5

 From the U.S. Small Business Administration (www.sba.gov/news/06-41.pdf) 

*A 2005 Department of Energy study found that a sustained interruption of power costs an average of $1,067 for a commercial business and $4,227 for an industrial business. (Enterprising Women, “Protecting Your Business from Power Loss” by Suzanne M.
 

Burns) 

** To apply for a loan from the Small Business Administration, you will need a copy of your federal income tax information, a short
 

history of your business, and personal and business financial statements. 6

 From the Trust for American’s Health (http://healthyamericans.org/reports/flu/brochures/FluBrochure.pdf)
 

NWBC Disaster Planning for Small Businesses 4