In case of emergency: A smoke alarm or a life preserver may save your life, but they won't save your business. You need a real disaster plan now. Your business' survival depends on it

Entrepreneur, April, 2003 by Daniel Tynan

Lonnie Lehrer thought he was prepared for anything. The CEO of Leros Point to Point, a New York City limousine service, had redundant computer systems for his dispatch software, battery backup for each computer, offsite copies of his customer data, even a spare generator. If New York were nailed by a bad winter storm or another big blackout, Leros would still be in business.

Then the first plane hit the World Trade Center on September 11, 2001m and all Lehrer's plans went down with it.

"Ninety percent of our business is tied to the airports," says Lehrer, 55. "We went from being a $7 million company to a $700,000 company overnight."

Lehrer knew if he didn't move fast, he'd be out of business in a week. Within two days, he'd slashed his own salary by 50 percent, negotiated a moratorium on loan payments with Ford Motor Co., and told his drivers they'd be facing a few lean months of partial salaries until business picked up. He also had to drop drivers who were independent contractors, lay off two staffers and reassign others temporarily.

But Lehrer's quick reaction paid off. Business slowly returned and is now better than ever: Leros recently acquired two smaller companies and expanded operations, bringing annual revenues to nearly $9 million in 2002.

Another reason for Leros' rebound: "Some of our competition disappeared after 9/11." Lehrer says. "The ones who were already on shaky ground just faded away."

The fact that Leros had any disaster plan at all puts it ahead of most companies. According to an August 2002 study by the American Management Association, more than half the corporations surveyed had no crisis-management plans in place. And the smaller the business, the less likely it is to be prepared. Analyst firm Gartner Inc. reports that less than 10 percent of small and midsized businesses have plans in place to manage crises and ensure business continuity, and that 40 percent of companies hit by a disaster will go belly up within five years.

"Small companies often spend more time planning their company picnics than for an event that could put them out of business," explains Katherine Heaviside, principal of Epoch 5, a Huntington, New York, public relations firm that specializes in crisis communications.

The reason? Many entrepreneurs believe that preparing for disaster is too expensive or time-consuming. But that's not necessarily true, say crisis-management experts. The most important steps for surviving a crisis cost little or nothing. Being unprepared, however, can be the costliest strategy of all.

PEOPLE FIRST

Every effective disaster-recovery program begins with a simple step, explains John Laye, an adjunct instructor at FEMA's Emergency Management Institute and author of Avoiding Disaster: How to Keep Your Business Going When Catastrophe Strikes (John Wiley & Sons). "You need to recognize that your employees are your most vital asset," Laye says. "The next step is to prepare employees by saying 'We want to protect your paycheck and our business, and [we] need you to be involved.'"

He urges companies to hold seminars for employees on how to prepare themselves and their families for potential disasters, and to set up emergency response teams of four or five employees--at least one team for every floor of the building the company occupies--trained in CPR, first aid, basic firefighting and evacuation procedures. Much of this information and training is available for free from the American Red Cross and local fire departments, Laye adds.

And while the fire department is training your personnel in CPR, ask them to visit your office and assess potential hazards and evacuation routes. Then invite the police to come by and evaluate your company's physical security This has two added benefits: If you ever have a real emergency, firefighters and police will be familiar with the layout of your building; they'll also know the team leaders to contact when they need briefing.

Laye recommends running practice drills twice a year--more often if your business has a high turnover rate--to improve your emergency response teams' ability to go it alone if you are caught in a natural disaster. "In an earthquake or tornado, this practice really pays off because the fire department isn't coming," says Laye. "They're going to day-care centers, nursing homes and hospitals, not individual businesses."

BUSINESS SECOND

Once you've figured out how 1:0 keep your people safe, you'll need to make sure your business survives as well. That means implementing a plan that addresses your key business functions, who's responsible for them, and what equipment or services you'll need to keep running.

"Gather your managers in some quiet place and say 'OK, you come to work one morning and, for whatever reason, the building is wrapped in yellow caution tape and you can't get in,'" says Laye. "Ask them 'Who are your key people, and what do they need to keep the business running?'" Laye adds that key employees aren't always the top executives; at insurance companies, for example, some of the most important people work in the mailroom.