1. Conduct risk assessment for your small business
Preparedness begins by thoroughly assessing and prioritizing risks, you can develop a targeted and effective disaster recovery plan.
Identify potential risks. List all possible threats to your business, including natural disasters (like floods or earthquakes), cyberattacks and power outages. Consider risks specific to your location and industry.
- Assess likelihood and impact. Evaluate how likely each risk is to occur and the potential impact on your business. For example, a hurricane might have a high impact if you’re in a hurricane-prone area. At the same time, an earthquake might be less likely but still critical.
- Prioritize risks. Rank risks based on their likelihood and potential damage. Focus your disaster recovery efforts on the highest-priority risks first, then address lower-priority ones.
RELATED: Risk assessment: The biggest risks small business owners need to consider
2. Identify critical business functions
In a disaster, some parts of your business are more crucial than others. Start by identifying which operations are essential for keeping things running.
- Identify essential operations. Determine what’s vital for your business to continue running, such as processing orders, customer support or maintaining key services.
- List key resources: For each critical function, identify the necessary resources, including people, technology and equipment. This helps ensure you can maintain these functions during a disruption.
Group your functions into categories like “vital,” “necessary” and “desirable” to help prioritize what to focus on first. Doing this gives you a clear roadmap for which areas need immediate attention so you can keep your business running as smoothly as possible.
3. Review your small business insurance coverage
Having business insurance coverage is crucial for protecting your business in a disaster. With the right coverages, you aren’t fully paying for financial losses out of pocket and can recover faster.
Start by reviewing your current insurance policies to ensure they cover various disaster scenarios. This includes:
- General liability insurance. This policy could help cover liability for physical injuries or damage to other people’s property that occur on your property. It can also help protect against some lawsuits and legal claims.
- Commercial property insurance. This can help cover damage to your physical assets, such as buildings, equipment, furniture and inventory. This policy often covers common risks like fire, flood and theft.
- Business owner’s policy (BOP). This policy combines both general liability and commercial property insurance coverage in one convenient (and often more affordable) package.
- Business income insurance. Usually a part of commercial property coverage, this policy can help cover lost income and extra expenses if you’re forced to stop operating due to a covered event. It can also help cover expenses such as paying employees, utility bills and rent during downtime. It’s sometimes called business interruption insurance.
Ensure that there aren’t any gaps in your small business coverage. For example, most policies don’t cover flood or earthquake damage, so consider if you need to purchase these separately. Some policies may not cover certain types of damage or may have caps on payouts.
In the event of a disaster, work with your insurance provider to file claims quickly. Keep detailed records and documentation of damages and losses to support your claims.
Regularly review and update your insurance policies to adapt to changes in your business and emerging risks. Proper coverage ensures that you’re financially protected and can recover more quickly from unexpected events.
RELATED: Why businesses need more than one business insurance policy
4. Prepare for employee safety and emergencies
The safety of your employees should be a top priority in any disaster recovery plan. Training employees on an emergency response plan helps protect them and minimize injuries.
- Create an evacuation plan. Include clear exit routes and designated meeting points outside the building.
- Review plans regularly. Make sure everyone knows the plan and post maps in common areas.
- Create shelter-in-place procedures. For situations where evacuation isn’t possible — like severe weather — develop procedures for sheltering in place. This might include identifying safe areas within the building, like basements or interior rooms.
Equip your workplace with emergency kits and make sure team members know how to access these supplies.
5. Backup data backup and have a recovery plan
Data loss can devastate a business, so having a solid backup plan is crucial.
- Back up essential data. Regularly backup critical files like customer records, financial data and inventory.
- Choose your backup method. Options include cloud data storage, offsite physical backups, or on-premise solutions. Cloud is popular because it stores data remotely and is accessible from anywhere.
- Automate and schedule backups. Set backups to occur daily or weekly, depending on your data volume.
- Test your backups. Regularly verify that backups work and practice restoring data to ensure smooth recovery.
- Create a data recovery procedure: Outline steps for restoring data and ensure key staff members are trained to execute it.
6. Create a communication strategy
Effective communication is crucial during a disaster. Start by setting up a communication strategy to keep everyone informed.
- Compile important contact information. You want to avoid scrambling for important information after a disaster hits. Be sure to include your employees, local emergency services, major clients and customers, service providers, suppliers, lenders and your insurance.
- Internal communication. Create a system for alerting employees about the disaster and providing updates. Use tools like email, text messages or a phone tree to ensure everyone receives timely information.
- External communication.Develop a strategy for updating customers, suppliers and other stakeholders. This might include posting updates on your website, sending notifications, using social media, or placing a sign on your door.
Regularly review your communication plan to ensure everyone knows their role. Clear and timely communication helps maintain trust and keeps business operations running smoothly.
7. Make a continuity plan
While business continuity and disaster planning often overlap, there are several key differences: continuity focuses on keeping the business running during unfavorable conditions while disaster recovery focuses on returning operations to normal as quickly as possible.
- Alternate work locations. Identify and plan for alternative work sites, such as remote work setups or temporary office spaces. Ensure employees know how to access these locations if needed.
- Supply chain disruptions. Develop strategies for managing supply chain interruptions. This may include having backup suppliers or alternative sourcing options to minimize the impact on your operations.
- Cash flow management: Plan for financial stability during disruptions. Explore options like lines of credit or emergency funds to cover essential expenses.
Business continuity and contingency planning helps ensure you can still generate revenue while also covering costs — even without operating at peak performance.
RELATED: Make a business continuity plan: A must-have for successful businesses
8. Test and update your disaster recovery plan
Regularly test and update your small business disaster recovery plan to ensure it’s effective.
- Conduct regular tests. Schedule periodic drills to practice implementing your recovery process. This includes testing data backups, evacuation procedures and communication systems. Regular testing helps identify vulnerabilities.
- Involve your team. If you have employees, engage their help in drills to familiarize them with their responsibilities. This also helps gather feedback on the plan’s effectiveness and areas for improvement.
- Update the plan. Review and update your disaster recovery plan regularly. Adjust it to reflect changes to technology, employees or procedures and address any new risks.
- Revisit after incidents. After disaster strikes or near-miss, evaluate the plan’s performance. Use these insights to make necessary adjustments and improve your response.
Regular testing and updates ensure that your disaster recovery plan remains effective and that your business is prepared for any situation.
