Small Businesses Learn From October Storm
In late October, a rare snowstorm hit the Northeast, piling heavy, wet snow on leaf-filled trees. Within hours on that Saturday afternoon, power lines went down and homes and businesses went dark, with some areas seeing an accumulation of 20 inches by nightfall.
Nearly 3 million homes and businesses along the East coast — in Maryland, Delaware, Pennsylvania, New Jersey, New York, Connecticut, and Massachusetts — were affected. In New Jersey, more than 600,000 outages were reported. In Connecticut, the hardest-hit state, 850,000 homes and businesses were without power, and some stayed that way for more than a week.
In his 20 years as owner of Northeast Express Transportation, Kevin Maloney had never experienced such devastation. His company, based in Windsor Locks, Conn., distributes car parts and farm equipment to more than 100 companies. Without electricity for five days, the company tried to shift to plan B: working from home. But most employees had no power, either. Trucks unloading goods at the company’s headquarters resorted to using headlights to cast light.
Maloney’s business was not the only one caught off guard by the storm. Without generators or contingency plans, many businesses were scrambling. Even companies that had the foresight to own generators hadn’t planned for such a long outage, and did not have a large enough gas supply, says Andy Markowski, Connecticut director for the National Federation of Independent Business.
“Some mom and pop businesses were closed a week or more,” he says. “And some of them were on the ropes financially even before the storm due to the recession .”
In the storm’s aftermath, many businesses are compiling their own after-storm reports, says Markowski, noting what went wrong and what can be done to prepare for future storms.
Some of the things business owners are doing, says Markowski, are reviewing insurance policies to make sure they’re covered for physical building damage. They’re also checking into business-interruption insurance, which can make up for lost sales or to help them meet payroll.
Businesses are also preparing for the next storm, which means purchasing generators. Some business owners are discovering, however, that if they rent their office space “the lease may prohibit having a generator,” notes Markowski.
In that case, having a backup location or another facility makes sense.
Southbury, Conn.-based RJM Systems, which develops software for colleges, lost Internet and phone service for 10 days. But the small company, which runs a hosting service for 45 colleges, runs its data center out of a space in Waterbury, Conn., where underground cables and huge generators power the plant. The company never went offline.
“It would have been a crisis had we run our own data center,” says Joanne Milburn, CEO and co-founder of RJM Systems. “Our customers didn’t know the outage even happened.”
RJM’s employees, however, still had to cope with the power outages. The company’s 10 employees set up shop in a nearby hotel conference room. Critical information was transferred to laptops, and employees communicated with clients via cell phones.
The biggest concern, says Milburn, was lost business, which could result in losses of to $200,000 per contract. So, the 800-number was quickly rerouted to the company’s Chapel Hill, N.C. office. RJM also had a loss-of-business clause in its insurance policy.
As businesses work to prepare for the next weather disaster, checking insurance policies to be sure you have the right coverage is critical, says Mark Soycher, human resource counsel at the Connecticut Business and Industry Association.
He advises business owners go over their policies with an agent, asking specific questions about what the policy does and doesn’t cover. Insurance companies “have great [disaster preparedness] resources,” he adds, “and they can give you guidance.”
To assess their preparedness, Northeast Express held a post-mortem meeting after the storm. The seven-person management staff broke down problems into two areas — infrastructure and communication. Then they created a list of things to investigate further.
One of the first actions: bringing in an electrician to determine how many watts the building uses. That information will be used to upgrade to a hybrid generator that can run on natural gas. “We’re going to add up the costs first,” adds Maloney. “They may not justify the expense.”
The logistics company is also gathering customer emergency numbers, and is putting together a disaster plan. Despite the inconveniences, Northeast Express was lucky. It lost less than $5,000 in business during the outage, and learned some valuable lessons in the process.
The most important, says Maloney: “Shame on you if you don’t take steps after you know this can happen.”