What to Do When a Natural Disaster Destroys Your Business

Tornadoes, floods, earthquakes, mudslides, and avalanches — the list of ways that Mother Nature could unexpectedly unleash her fury seems almost endless. The type of natural disaster that you could face depends on where you live. Many weather-related disasters, particularly as climate change has accelerated, have become more common and more costly than ever before.

Having insurance can give you some financial relief if a natural disaster destroys your property. However, your choices in the hours, days, weeks, and months following a disaster will determine whether your business recovers. You need to run it as best you can, look for financial assistance, and decide whether keeping your business open is worth the cost and the effort.

In many cases, your business can survive the disaster and start thriving again. If it doesn’t, exit your business in a way that sets you up for a fresh start.

The First Few Days

On May 22, 2011, an EF5 tornado ripped through the small U.S. town of Joplin, Missouri. The community lost 158 people and sustained over $2.8 billion in damages. Resident John Motazedi owned a business that provided IT services to local health care providers. The doctors needed access to medical records to treat the people injured by the tornado.

If your company is struck by disaster, imitate what Motazedi and other business owners like him have done in the days following a natural disaster:

Realize that others depend on you. Motazedi couldn’t afford to stand by and grieve for his losses. Doctors and victims depended on his business to provide essential medical care, so he had to stay involved even though he had lost his property.

Ask for assistance. Motazedi realized that his 9-to-5 job was about to become a 24/7 marathon. He called owners of similar companies in three different states, and three executives came to Joplin within 24 hours. Later, an additional 20 IT engineers showed up to help.

Focus on essential tasks. After the three execs arrived, Motazedi assigned them three specific tasks. The first contacted his suppliers, asking them to ship backup software and equipment. The second focused on his cash flow, and the third acted as his office manager.

Stay in touch. In October 2012, superstorm Sandy knocked out power and flooded lower Manhattan for several days. Jennifer Walzer, who owned a company that helped other businesses salvage lost computer data, couldn’t reach her offices. Her office manager ordered special mobile phones and shipped them to all eight of her employee’s homes. This step allowed them to stay in touch, help current customers, and field calls from new customers who needed them.

Give back to the community. Mark Shuman, who lost his restaurant and catering company during a tornado in Moore, Oklahoma, focused on providing food, grief counseling, and other assistance to the community. When he rebuilt his business, others remembered his generosity and supported his restaurant. The community supported Shuman because he had supported them.

After the Crisis

When the crisis ends, you have to decide whether to rebuild your business or take your life in a new direction. If you decide to rebuild, contact the government to seek financial assistance for cleanup, replacing your assets, and replacing your income. Also, ask for extensions related to filing business documents so that you can focus on recovery.

If you decide to move on, you’ll need to liquidate your assets. Keep these points in mind:

• Inventory your remaining assets. Write down brand names, model numbers, serial numbers, quantities, and other pertinent information. Also, record which items are in usable condition and which you should scrap.
• Talk to your creditors. As long as you have a well-constructed liquidation plan, your creditors will most likely cooperate. Keep communication lines open.
• Make your sale items presentable. If you can, invest in fresh paint, new parts, or other cosmetic improvements. Also, present any warranty papers or other relevant documents about your assets.
• Work with an appraiser. Ask an appraiser to calculate the liquidation value of your assets so that you accept fair offers.
• Hire a professional to handle the sale. You might have a more successful sale if you turn it over to a professional auctioneer, broker, or dealer.

When there’s no hope in sightIf the and cost of selling your assets is too much, or if the sales won’t satisfy your creditors, bankruptcy might be the best alternative. Don’t view bankruptcy as a failure. Look at it as a chance for a fresh start.