Thursday, December 22, 2005
Fischer urges businesses to prepare for disaster
By SUE WATSON
A big lesson business owners and operators have learned from Hurricane Katrina is be prepared for disaster, said Don Fischer, director of the Small Business Development Center at Ole Miss.
Fischer was at the Holly Springs Chamber of Commerce Christmas luncheon December 8 delivering a speech on disaster preparedness for small businesses.
Since Hurricane Katrina wiped out 80 miles of homes and businesses along the Mississippi Gulf Coast in late August this year, Fischer has had an up-close look at what a major disaster can do to businesses. He went to the coast to help small businesses get back up on their feet.
“Unless you have been there, you cannot believe the destruction,” he said. “The message is, no one was prepared for this disaster.”
He talked about three communities in Hancock County that no longer exist.
The statistics are unnerving.
Forty thousand coastal businesses were either physically damaged or sustained major economic loss. Forty percent of these - 16,000 - will never come back, he said. Seventy percent of the small businesses will be gone in two years and all total, 30,000 businesses will be lost, Fischer said.
After Katrina there was no electricity, no telephones, no drinking water and no food, he said.
“For us to respond we’d have to bring everything with us - our housing, foods, medicine,” he said.
The biggest constraint for recovery of businesses after the storm was no money. Fischer said most of those businesses had no money set aside for an emergency response. He urged small businesses to set aside two to three percent of their sales volume in savings for unexpected emergencies.
“When you are in response mode you have to work quickly and without constraint,” he said.
Small businesses anywhere can be crushed by an earthquake, a fire, a tornado, a flood.
Preparedness means a business should identify and maintain a relationship with an alternate source of supply, even if the second source is not used. That guarantees that supplies can still be brought in even if the primary supplier is not able to deliver or is also in an emergency situation.
Fischer said coastal businesses have dealt with losses in several ways which includes reopening as a home office while in recovery. Some businesses have pooled their resources and operate together out of a shared location.
E-commerce is another way to stay in business, he said.
Small business owners should also be prepared to lose a major customer base, as in the case of Katrina where customers who lost homes or jobs evacuated and the customer base disappeared.
“Having cash will help you get back in business faster while you wait for a small business loan,” he said.
Small business owners should closely manage their debt.
“Debt is an effective way of expanding your business but an emergency will leave you still owing debt,” Fischer said. “You will have to be able to service your debt.”
Finally, small businesses should maintain adequate insurance as a hedge against the risk of business interruption or loss.
“These three things will help you recover faster,” he said. “Speed means everything.”
Retrieval of essential records to substantiate losses is critical after a disaster. An extra record of income statements, customer lists, supplier lists, tax returns, balance sheets and cash flow records should be kept at a separate location from the business as a backup, he said.
“You will have to reconstruct current financial statements for small business losses,” he said. “If the records are gone, they are reconstructed from memory and from federal tax returns. Back up and store information continually and continue to back-up everything and keep it stored off site.”
Since power and communications can be disrupted for months in major disasters, a business should have a plan to get back in business after disaster. Things which may be critical to recovery for business are power generators, cell or satellite phones, computer equipment, satellite internet access and emergency radios.
Businesses should create an evacuation plan and reassembly plan for their own personal use and for business use. Emergency contact numbers should be listed and a scenario of where the employees and owners will meet after the disaster. Communication responsibilities should be discussed beforehand.
Fischer said the small business administration was not prepared for Katrina.
“But it is ready for the next emergency, now,” he added. “We responded well in Katrina and now are in a decade-long or longer recovery process,” he said.
Chamber of Commerce executive director Susan Jordan advised that the small business breakfast seminars that were cancelled because Fischer was away at the coast helping in recovery, will resume in February.
Entertainment at the chamber luncheon was provided by the Holly Springs High School Choir and the seventh and eighth grade ukulele band.
For more information on small business development, Fischer can be contacted at Ole Miss by phone at 234-2120 or by e-mail at email@example.com.
(662) 252-4261 or firstname.lastname@example.org
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