As a small business owner, you’re a leader. You have a clear vision of where you’re going, as well as the potential obstacles you could encounter along the way. While some potential hurdles can easily be overcome—changing government regulations, new competitors, taxes—others are more serious.
With the advent of COVID-19, small business owners have realized the importance of having a plan for everything from natural disasters to cyber crime to government mandated closures. To prepare for a disaster, you need two plans: a business continuity plan, and a disaster recovery plan. But what’s the difference?
Read on to find out everything you need to know about crisis management and protecting your business in the case of a disaster.
Business continuity vs. disaster recovery plan
When major disaster strikes, it’s important to have a plan for dealing with the immediate aftermath, as well as your business’s eventual return to normal. You should consider all of the following:
- How to communicate with internal and external stakeholders (employees, investors, your community, media, etc.)
- How you will cover the cost of damages and repair to physical property or to your data in the case of a cyber attack
- How you can maintain continuity of service with damaged data or property
- How you can meet payroll and cover monthly expenses if a period of closure affects your revenue
- How you will reopen
To best organize your response, it’s important to create two distinct plans: your business continuity plan and your disaster recovery plan. A business continuity plan focuses on maintaining services and meeting financial obligations in the aftermath of an unforeseen, disruptive event. A disaster recovery plan is your plan for returning to business-as-usual.
Next, we’ll take a closer look at each type of plan.
What is a business continuity plan?
As a small business owner, a business continuity plan is actually more than one plan—it’s a variety of plans for how you can maintain continuity in the face of any disaster scenario. It’s important to brainstorm your business’s potential risks, run a business impact analysis, and make a plan for each.
From there, a business continuity plan contains the following:
- A plan for maintaining sales and revenue in several scenarios (damaged equipment, need to relocate, no in-person services, cyber attack, etc.). Questions include to ask:
- Can employees work remotely?
- Which services can be transitioned online? Which can be suspended?
- What information, networks, systems, and software are necessary for continued operation? How would you cope if one of these was compromised?
- Would you need to offer new goods or services in the event of a longer closure?
- A plan for maintaining existing overhead expenses in the event of reduced revenue.
- Estimated costs for a temporary relocation, as well as a plan to fund those costs.
- A crisis communication plan, with point-people for communicating with different stakeholders.
All in all, your business continuity plan is the first place you turn in order to begin dealing with a disaster’s aftermath. Anything that can help you to boost revenue, maintain cash flow, and meet unexpected expenses should be part of this continuity planning.
What is a disaster recovery plan?
While your business continuity plan focuses on the immediate response to a disaster, your recovery plan is all about the long game—reopening your business. After days, weeks, or even months of interrupted service, you’ll eventually be ready to reopen your doors (even if it’s in a new location).
The recovery strategy includes:
- An analysis of how long your business can continue before reopening, and a timeline for reopening your business
- A plan for meeting the cost for repairs or permanent relocation
- A backup plan for recovering or restoring any lost data
- The steps you’ll take to transition from interrupted services back to regular business. Costs you may need to cover include:
- Rehiring employees and meeting payroll
- Paying back taxes or back rent
- Advertising to announce your reopening
According to FEMA, 90% of small businesses close their doors within one year of a disaster. Having a clear timeline for reopening (as well as a concrete plan for getting back to business) is one of the best ways to ensure you can open your doors again.
The other essential element?
Insurance.
Insurance policies for business continuity and recovery
As you can see, both business continuity and disaster recovery plans require a way to cover expenses and fund relocation during and after a disaster. Unless your business has ample cash-on-hand to cover months of interrupted service, insurance is a crucial part of your disaster planning.
Consider the following kinds of policies:
Commercial property insurance can cover damage and loss of your building and just about everything inside of it. It can also help to cover the cost of business interruption due to direct physical damage.
Data breach insurance can help cover your liability in the event of data breach or data loss.
Business interruption experience does not cover property, but it can help with the following expenses during a period of interruption:
- Your business’ rent and lease
- Relocation costs
- Payroll
- Payments on business or auto loans
- Tax payments
Beyond these kinds of insurance, it’s important to make sure your business is protected from another kind of potential disaster—costly insurance claims.
Insurance: protecting your business from other obstacles
Natural disasters and data breaches can pose a significant obstacle to your small business’ continued health—but so can more common occurrences. In addition to planning for unexpected disasters, it’s important to take into consideration crisis management and guard against the everyday risks you take on as a small business owner.
Natural disasters and data breaches can pose a significant obstacle to your small business’ continued health—but so can more common occurrences. In addition to planning for unexpected disasters, it’s important to take into consideration crisis management and guard against the everyday risks you take on as a small business owner.
Most businesses need the following kinds of policies:
- General liability insurance to protect against client and third-party claims of property damage, bodily injury, personal injury, and advertising injury
- Professional liability insurance to protect against client and third-party claims of professional mistakes or negligence
With Thimble, you can guard yourself against these risks in less than 60 seconds. All you have to do is download the Thimble app or click “Get a Quote.” When you enter your ZIP code, staff size, and a few details about your business, we’ll generate an instant quote. Purchase with a click and cross one more thing off your disaster preparedness to-do list.
Wherever your business is located, you know there’s always the potential something will go wrong—from wildfire to vandalism to an accident that injures a client. To protect your small business, take the following steps:
- Make sure you have a business continuity plan as well as a disaster recovery plan.
- Consider commercial property insurance, data insurance, and business interruption insurance to guard against damage from natural and unnatural disasters.
- Take our general liability insurance and professional liability insurance so that an on-the-job accident doesn’t interrupt your business, either.
As a small business owner, it’s important to focus on what matters—growing your business. Leave insurance to the professionals so that you can rest easy knowing you’re prepared for anything life tries to throw at you.
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.
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