GAO: Businesses Key to Community Recovery

In a recent report, the Government Accountability Office is calling on state and local governments to include business recovery planning. The goal is to reduce business relocations and help them adjust to changing market conditions so they can play a role in reviving an afflicted area.

The report identifies businesses as a key element in rebuilding a community after a major disaster, such as a hurricane or tornado. “Widespread failure of individual businesses may hinder a community's recovery,” according to the GAO report. Homestead, Florida is cited as an example of how a hurricane can alter a community. Following Hurricane Andrew, the Air Force base permanently closed and retirees and winter residents opted to move elsewhere. As a result, the city and the market fundamentally changed.

Some of the planning measures call on local and state government to maintain programs that help with recovery. Measures include low-interest loan programs, establishing outreach programs to help businesses understand changing market conditions, and taking steps to encourage businesses to stay in the area following a disaster.

Read the full report.

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Many Would Ignore Evacuation Orders

A recent study uncovers what many have suspected, but authorities often deny. Roughly 63% of parents said they would defy orders to evacuate and instead try to reach their children in the event of a major disaster or terrorist attack. The finding comes from Columbia University's National Center for Disaster Preparedness.

Additionally, 45% of parents also reported that they did not know where they would be able to meet their children if they had to be evacuated. School disaster plans often include a meeting place for this event, but the study clearly reveals that parents have not been sufficiently informed on the plan.

For more details, read the full report

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$2.5M Grant for Business Recovery

As the title suggests, a $2.5 million grant is being provided to the Louisiana Economic Development Department “for business assistance and recovery” in the wake of Hurricanes Gustav and Ike. What is this money intended to do? According to the LED press release:

“LED plans to use the $2.5 million investment to fund hurricane recovery projects, including six business counseling centers currently located in affected communities, a 24-7 business recovery information center available at 1.877.610.3533, technical assistance for small businesses impacted by the hurricane and long-term economic recovery strategic planning.”

Let me see if I have this straight, the federal government is giving money to the state government so the latter can operate counseling centers? Meanwhile, small businesses in the affected areas can come to one of the six centers to apply for recovery loans that will take weeks, possibly months, to get.

I suppose I am a little surprised that it took three full weeks for the state to get a grant from the feds even though everyone knew the hurricanes were coming well in advance.

The lesson for all small businesses is, at the very least, to have a readily accessible cash reserver that can last at least a month, preferably two. Clearly, the government is a last resort as a means to recovery. For all their anticipation, planning, preparing, etc. -- which I know Louisiana authorities took very seriously this year -- they are still quite slow to act.

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5 Reasons People Fail to Plan for Disasters

Planning is not a difficult thing to do, particularly when you're trying to preserve or grow something containing value. Nonetheless, people often fail to do it. Below are some common reasons for this:

• Positive Thinking – People have a tendency to think about the positive aspects as a mechanism of avoiding or denying potentially bad things. It's the “it can't happen to me” syndrome.
• Shifting the Blame – Blame for negative events and consequences is often shifted to someone else. This is a way for people to protect themselves and avoid responsibility. Perhaps the most popular target is the government and its perceived failure to “rescue” a business who failed to prepare themselves for a predictable disaster.
• Maintaining the State Quo – The old adage “if it ain't broke, don't fix it” often gives people an excuse to avoid planning for potential disasters. However, nothing could be further from the truth. Crises can happen, regardless of what anyone thinks.
• Procrastination – Believing that disaster is always a long way off encourages people to delay planning. However, many can occur with little or no notice.
• A Waste of Effort - Spending time and effort to address potential problems can be seen as a wasted investment. After all, you don't really need preparedness unless a crisis occurs, right? Wrong, waiting until a disaster is underway will increase the time and cost of recovery.

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Is Recovery Assistance Better than Planning?

According to the Louisiana Economic Development Department approximately 100,000 businesses in the state were impacted by recent hurricanes. That doesn't even include what happened in other states, such as Texas and Mississippi.

Louisiana and the federal government have responded to this tremendous impact by setting up a number of centers to help with recovery resources. Let's take a quick look at that list:

• Free Counseling and Technical Assistance
• Disaster Loans for Physical Damage
• Disaster Loans for Working Capital
• Workforce Assistance
• Disaster Unemployment Assistance
• Extension of Federal and State Tax Filing Deadlines
• Temporary Housing
• State and Federal Contracting Opportunities

To be sure, those resources have potential to be helpful. But, they are not conduits to free money as many believe. In most cases, those in need are simply postponing the cost of recovery, which may or may not have interest tacked on to it. In other words, the government is willing to loan you the money to recover, but you will have to pay it back. Moreover, the loan process will be sped up, but that's by government standards, it still takes a minimum of 6-8 weeks before any cash starts to flow.

The lesson here is to prepare for disaster ahead of time. A little planning goes a long way to reduce recovery cost, time, and effort.

Do You Have the CVS Edge?

Hurricanes Gustav and Ike devastated many towns along the Gulf Coast. Power was knocked out, roads were closed due to debris, businesses remained closed. But one consistency can be found in almost all locations stretching from south Texas to central Louisiana: CVS/pharmacy opened its doors for business within 24-48 hours.

You might ask why that's a big deal, after all, they're a major chain and should be able to get back to business quickly. That has nothing to do with it. Many large stores take several days to open. Nor is it eager store managers (okay, maybe that plays some role).

The clear answer is CVS has an effective disaster preparedness plan. They're so sure their plan works well that they issue a press release during the immediate aftermath to make sure the media knows their stores are open for business. And on top of all that, sometimes they do a little extra like give away ice and water to residents.

Business owners, imagine if you were in such a position. Think about that competitive advantage! Wouldn't it be nice to come through a disaster that has devastated your town and be able to loudly announce that you're operational and ready to help the community?

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Simple Tips to Overcome Disaster

For the last 36 hours, tropical storm-force winds and outer rain bands from Hurricane Ike swept through Baton Rouge. By early morning, the power was knocked out for more than 15,000 people, including many businesses.

The local energy companies responded quickly and had most of it restored within hours. However, that did not stop rumors that the mayor was set to reimpose the Gustav curfew and force businesses to close for the day. The police department held a mid-day news conference to refute the rumors, but harm had already been done.

As if the weeks-long power outage had damaged the local economy enough, the last thing businesses needed was an unsubstantiated rumor that they were closed for the day. Savvy owners might have figured out ways to bring in the customers, but most probably suffered one more day (12 total) of lost revenue.

Business owners would do well to draw a few simple lessons from this series of disasters:

1. Have a plan to deal with the unexpected so you can resume critical functions as soon as possible.
2. Keep a cash supply easily accessible in case of emergency. This may be necessary to cover expenses, especially to pay employees to keep them around.
3. Invest in your own power source, even a modest one
4. Be creative in attracting customers in the aftermath of a crisis. In many cases, they need you to be available, even if they're not sure how to reach you.
5. Don't count on the government to rescue you, especially not in a timely manner. Sure, you can get a loan relatively quickly, but that's not the same as resuming business.

It is truly sad to know that a number of businesses will not survive this hurricane season simply because they weren't ready to meet this predictable scenario.

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Gustav Observations: 10 Days that Shook Commerce

It's been ten days since Hurricane Gustav ripped across Louisiana. Power has been restored to roughly 70 percent of the Baton Rouge area, yet many businesses remain closed.

The economic impact on the region is mounting. According to some reports, losses are expected to reach $10 billion in both private property and lost business. Sadly, almost all of the businesses are losing money because they have no power. A small percentage were damaged by winds, water, or falling trees, but most simply are without electricity.

It's unfortunate that these businesses will suffer a huge loss over this time, even more so because they could have taken steps to mitigate. Many did handle the problem well and reopened within a 4-7 day window by using generators. Sure, there was no air conditioner for the customers, but at least they had customers.

Business owners (and their employees) need to ask themselves whether they can really afford to let circumstances close them for 10 days.

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Gustav Observations: Missed Opportunity

Over Labor Day Weekend my family and I evacuated our home in southern Louisiana for a safer place farther north some 200 miles inland. We thought we would be out of hurricane Gustav's immediate danger zone and would have little to worry about other than some strong winds and heavy rain. What we found was something different. Clearly, many others were surprised as well.

The town where we stayed was packed with evacuees. Many more had passed through as they traveled north as well. The morning of the storm we decided to get breakfast at a local fast-food chain. As we perused the menu, the girl behind the counter politely mentioned they were out of everything except biscuits, salad, coffee, and water.

Naturally, I had to wonder if they considered how the coming storm would impact them. Obviously, the news had been talking about Gustav for days, the restaurant was located on a major evacuation route, and they could have made a significant jump in revenue had they planned ahead. Instead, they sat idle for most of that day, the next, and possibly a third day while they waited for the storm to pass and new shipments to reach them.

I'm sure this particular restaurant was not alone. Many failed to plan ahead. As a result, they lost revenue not only after the storm, but before it ever struck.