As extreme weather, wildfires, and other natural disasters make news headlines, business owners may wonder about how to prevent and deal effectively with lost business after a natural disaster. It is estimated that approximately twenty-five to forty percent of disaster-impacted businesses do not reopen their operations after a natural disaster. To help improve your odds of restarting your business, there are a number of preventative and remedial measures you can undertake to help reduce lost business property and income in the wake of a natural disaster. Below are some key ideas for you to consider before and after a natural disaster harms your business.
Every business should develop a plan for limiting disaster risks and reestablishing business operations post-disaster. Depending upon your location, your business should assess the different types of natural disasters your business may likely face that could lead to business disruption. Based on these potential threats, your plan should adopt and implement processes and procedures to prevent harm to your customers and employees, to protect your business facility and equipment, to secure your financial records, and to determine how to handle your business operations and communications during and after a disaster. For example, if your business is in a wildfire area, then your plan would likely address fire safety measures, such as clearly marking fire exits, training staff on fire evacuation routes, installing proper fire alarms and sprinkler systems, and handling emergency communications to customers, employees, and first responders. In addition, consider going paperless and either backing up your computer files regularly or utilizing cloud storage services to preserve key business documents. Alternatively, you may want to place any important paper documents in a secure, but separate location, from your business. Furthermore, your plan should address options for temporarily continuing your commercial operations until you are able to return to your normal business activities. Most states have disaster preparedness agencies and you may want to contact them for advice on known or expected disaster risks in your community. A list of links to state disaster relief agencies can be found on the Small Business Administration website. The federal government’s Ready.gov website also provides information for individuals and businesses on identifying, preventing and remedying risks from unexpected disasters. This federal site offers a free software tool for download, “Business Continuity Planning Suite”, to help your business develop, enhance, and revise its business continuity plan.
Having the right kind and amount of insurance in place will also play a vital role in your ability to finance and restart your business operations after a disaster. Typically business property insurance can be obtained to help cover damages or losses of business equipment and facilities. Business interruption insurance may also partially or fully reimburse your business for lost income and continuing operational expenses in the aftermath of a natural disaster. Since insurance policies contain coverage deductibles and exclusions, it is important to work with a qualified insurance professional to identify what types and amounts of insurance are important to safeguard your business property and income. For example, many businesses impacted by Hurricane Sandy realized belatedly that their property insurance did not cover flood damage. Therefore, it is important to identify the types and amount of insurance that will best suit your business needs and budget.
When a natural disaster is declared, there are a broad range of state and federal governmental services that may become available to impacted businesses. At the federal level there are about seventy forms of disaster aid from seventeen different agencies, including financial, legal, medical, and employment assistance. To help your search, DisasterAssistance.gov offers an anonymous “Find Assistance” questionnaire that will guide you to a personalized list of federal and state relief programs, including low interest loans, disaster unemployment insurance, and emergency capital resources for your impacted business. The Small Business Administration also offers a list of state disaster assistance programs on its website for local assistance programs.
In instances of natural disasters, state and IRS tax provisions may offer tax relief to affected businesses, including more time to file and pay your taxes, the ability to claim deductions for disaster-related theft or losses on your tax returns, and more rapid refunds for disaster-related claims. The IRS has created a Disaster Resource Guide for Individuals and Businesses with suggestions for disaster-preparedness, worksheets on calculating casualty and theft losses and ways to reconstruct tax records destroyed in a disaster. You may want to locate and visit a Taxpayer Assistance Center to discuss your disaster-related tax matters with an IRS representative. The IRS further offers an assortment of short videos and podcasts on disaster-related tax issues. In addition, check with your state’s taxing authority to determine what state tax relief programs might be available when a natural disaster impacts your business.