Forty percent of businesses do not reopen after a fire or disaster
Forty percent of businesses do not reopen after a disaster and another 25 percent fail within one year according to the Federal Emergency Management Agency (FEMA). Similar statistics from the United States Small Business Administration indicate that over 90 percent of businesses fail within two years after being struck by a disaster. It is a common misconception that insurance awards and aid from government agencies will allow merchants to pick up the pieces after a flood, major earthquake or like disaster — many types of disasters are not covered under normal insurance policies and aid from government agencies may be too little, too late. In this time of uncertainty, emergency preparedness is a hot topic. Many municipalities and chambers of commerce are sponsoring safety forums and emergency preparedness workshops. While very useful, most of these forums and workshops focus on the immediate dangers of a disaster and not on long-term business survival. While immediate response to a disaster is undeniably important, the importance of long-term business survival is almost as great. When listing disasters, most people start with earthquakes, floods, and fires, along with the more recent additions of terrorism and war. However, smaller incidents, such as burglary or water damage due to faulty sprinkler systems, can be just as catastrophic to businesses. Incidents need not affect a whole community or area to cause a catastrophic business failure. Even non-catastrophic occurrences can result in immense losses of time and money. For example, Tom Ralston Concrete was burglarized in late March. Among other items, the network server and a number of computers were taken. Initially, it was thought that the backup tapes had also been stolen. While the tapes were eventually recovered, Tom Ralston Concrete lost two days worth of data. Tom Ralston estimates that the cost of the burglary is approximately $20,000. But, if the back up tapes had been stolen, recovery costs could easily have totaled over $100,000. This cost is based upon Gartner Group data estimating that the cost to recreate a single document is approximately $200. While not threatening its survival, the burglary has had a definite economic and emotional impact on the company.