BE PREPARED

By HOWARD GROSFIELD

From forest fires in British Columbia to tornados in Ontario, the news never fails to deliver an onslaught of stories profiling devastating loss to homes and businesses. Yet while catastrophic disasters may grab national headlines, smaller, less publicized disruptions to business – such as local power outages, theft, Internet viruses and even illnesses such as H1N1 flu – are much more common, and can be particularly worrisome for small businesses. Despite this, many Canadian small business owners remain vulnerable to these everyday risks.

In fact, a recent American Express survey conducted by Angus Reid Strategies found that 41 percent of small business owners in Canada have already experienced an event that significantly impacted their business, with most (88 percent) saying they were disrupted for more than a week and close to half (46 percent) for more than a month. Yet despite the risk, 80 percent of respondents overall said preparing for potential disruptions is lower on their to-do list, or not even on their radar.

Lauren Gervais, who owns Data Probe, a market research firm based in Winnipeg, knows first-hand how important it is to plan for the unexpected. In 2008, her company expanded into a new space, and due to a faulty plumbing installation, experienced a catastrophic flood. “It destroyed pretty much everything,” said Gervais. “The ceilings collapsed, furniture was floating – we couldn’t salvage a thing.” While Gervais had insurance, the flood nevertheless halted her business for six months. “I thought I had done everything right, but I was astounded by how long we were out of commission,” she said. “As a small business owner, I can see just how easy it is to get stuck in the here and now – but if you can’t do it yourself, you really need to have someone on staff that’s looking ahead at the big picture.”

Understandably, prioritizing how both time and money is spent can be a constant juggling act, and particularly during a recession, it’s natural and often necessary to focus on increasing profits rather than on expenditures like preparing for unforeseen circumstances. Indeed, 35 percent of survey respondents cited money as a hindrance to developing a plan, while a third said finding time was a struggle – not surprising considering that small business owners tend to play the role of everything from salesman and accountant to head of human resources in the first few years of business. Without someone dedicated to big picture planning, tasks like business continuity planning can fall further down the “to do” list.

Taking a look at business security

The definition of disruption can vary significantly from business to business and from industry to industry. The important thing is for small business owners to step back and carefully assess the issues that constitute a significant disruption for their own situation and have a plan in place to manage. Fortunately, there are many easy and inexpensive things that can be done, and often it’s all about finding the right place to start. For example, determining alternative staffing resources in case of an emergency health situation like H1N1 flu and talking to employees about how to better protect themselves are simple measures that can make a big difference. Other areas to look at can include:

Insurance Needs – While insurance can be expensive, managing through a flood or severe illness can be even more expensive in the long run. As businesses grow and evolve, so do insurance needs, and important assets should be covered appropriately – including employees. For example, the survey found that 51 per cent of small business owners had fire or flood insurance, yet only 20 per cent had catastrophic illness insurance in case of an emergency health situation.

Intangible Losses – Beyond the obvious damage that can occur when disruption strikes are intangible losses such as loss of client confidence and damage to a businesses’ reputation. Pinpointing the cost of such losses to the business can be next to impossible to determine. On the other hand, many small business owners have developed best practices that reduce the likelihood of the disruption happening in the first place and in essence, controlling the controllable.

Back-ups – While 57 percent of survey respondents had a data back-up plan, only 31 percent had a back-up power supply on hand for electrical systems. Not every business is reliant on electronic data but for those that do, back-up locations are a common defense tactic. Knowing the areas that are crucial to uninterrupted business operations is key.

Investing in the future

There’s no doubt that as businesses mature and growth allows owners to outsource some activities or hire additional employees, planning for everyday risks becomes more realistic, both from a time and money perspective. The good news is that while the current business climate is still difficult, things are improving: the survey found that nearly one in three (30 percent) Canadian small business owners now feel their business is on the upswing, while the proportion of those who feel their business is still suffering from a slight or significant downturn has dropped from 56 percent to 48 percent since June 2009. With a better economic outlook in sight and even moderately strong and steady growth over the next two years forecast by the Conference Board of Canada, investing in peace of mind may become an easier reality for Canada’s small business owners.

Howard Grosfield is the vice-president and general manager of Small Business Services for American Express Canada and International.