Japan Crisis Offers 5 Small-Business Lessons

NEW YORK (TheStreet) -- The devastating March 11 earthquake and tsunami in Japan should spur small-business owners here in the U.S. to review -- or perhaps create -- emergency plans.

With all the planning, managing and overseeing a business owner is responsible for in smaller firms, emergency plans may take a back seat. But an "emergency" doesn't need to be an earthquake measuring 9.0 on the Richter scale.

It could be a weather-related event such as a heavy snowstorm, given this year's rough winter across many parts of the U.S., something like the massive power failure across the eastern seaboard in 2003, a fire or the death or injury of an owner or key employee.

The basics are easy: Back up data on separate servers and have a chain list of employee phone numbers. But what if the backup server is in the same office as the disruption or cell phone service isn't working?

"A lot of people talk about crisis plans," says Richard Levick of Levick Strategic Communications, a public relations firm specializing in crisis communication, but business owners and employees should also be able to identify where employees are and even know spouses' names and contact information.

Given technological advances, contact information could be more useful as a mobile, instantly updated app, Levick says.

Business owners also should not assume customers know of an interruption. Levick says owners should communicate frequently and in as many places as possible -- through Twitter, Facebook and email, for instance, with customers.

Most importantly, a small-business owner must have the ability to lead his or her team through the crisis.

"Employees are looking to any source of information as quickly and accurately as possible," Levick says. "A small-business owner needs to step into that leadership role, and you can only get there by anticipating or being prepared."

Business owners should anticipate chaos and confusion and be able to offer a sense of calm to employees, he says. Preparation need not be overwhelming or expensive. Here are a few simple and cost-effective tips to have in place -- just in case:

1. Be in the cloud
Emergency or not, businesses of all sizes days should already back up their databases by not only having emergency servers (preferably in a state less prone to natural disasters), but adding employee access to virtual servers.

Cloud computing is a new-age term for something the Internet does naturally -- keep information on the Web, where it can be reached from wherever there's a working connection. Information technology firms pushing the cloud server include VMWare ( VMW), Hewlett-Packard ( HPQ), IBM ( IBM), EMC ( EMC) and Rackspace Hosting ( RAX).

Citrix Online, a unit of Citrix Systems ( CTSX), is a leader in offering remote-connectivity programs for small businesses. Web-centric programs such as its GoToMyPC or GoToMeeting can help businesses and their employees function just about anywhere in the world via so-called Web commuting.

Technology aside, Citrix Online President Brett Caine says it's important for businesses to have clear policies and rules surrounding what he refers to as "work shifting."

"First you have to identify the people, the roles and the kind of rule set around a flexible policy," Caine says. While sales work may make sense, "not all roles are suited for work shifting. Can the role be done outside the physical location, and do you have confidence and trust that the employee can do these things without oversight and supervision?"

Particularly in emergency situations, those working remotely need to "over-communicate" with staff, clients and others, he adds.

2. Cross-train employees
Annie Searle, former senior vice president for enterprise risk services for Washington Mutual and head of its crisis management team, suggested that business owners cross-train employees so work can be done even if an expert is missing.

"Small businesses may be more inclined than large companies to do that because fewer people wear more hats, but suppose you don't have power. Does someone know how to manually create an invoice and take payment?" Searle asks.

According to Searle, now an operational-risk consultant, a quarter of all small businesses go out of business after a high-impact event.

"They can't survive because they don't have a way to stay in business," she says. "They haven't thought of a plan that involved a workaround."

True, situations differ for, say, restaurants and technology firms, but "whatever the circumstances, you have to imagine what your manual workaround will be," Searle says.

3. Create emergency preparedness procedures
Businesses and offices should also have emergency supplies, such as a first aid kit, water bottles, defibrillators, fire extinguishers, battery-operated flashlights and other shelter-in-place supplies on hand, according to a checklist for small businesses created by the American Red Cross and FedEx ( FDX).

Business owners and employees should also know where to find gas and water lines and how to turn them off if needed.

Searle also suggests that business owners "pre-identify" where employees can "duck-cover-hold" during an earthquake or other event.

Business owners should also have a system in place to find employees in an emergency -- as well as spouses and kin.

4. Establish a succession or business continuity plan
Creating a business continuity plan isn't just for natural disasters. Experts recommend them for general planning purposes, especially if a business is owned by more than one person.

Barry Sloane, chief executive of Newtek Business Services ( NEWT), which works primarily with small businesses, says owners should be knowledgeable about financial planning and put together a budget that projects revenue and expenses a year or two out and includes monthly updates.

This will "enable a business to be able to manage their liquidity needs, capital needs and risk," Sloane says. "Business owners are entrepreneurs. They may not necessarily be organized."

There should also be a succession plan if an owner can't return to work. If a business has two partners, they may "have an agreement between them which allows the other to have operating control or the ability to buy out the partner," Sloane says. "Those are good things to have in place."

5. Practice practice practice
Experts could not emphasize enough the need for businesses to practice what they preach. Once plans are formulated, businesses should hold drills several times a year so employees know what to do in an emergency.

"A crisis plan is both brilliant and also a false feeling of security. It's only great on the day you wrote it. For it to be useful you need to practice it at least twice a year," Levick says.

To contact the writer of this article, click here: Laurie Kulikowski.

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