As a small business owner, you probably work hard to keep your finances in check, but unexpected events can sabotage those efforts — and these events happen more often than you might think. An estimated 25 percent of businesses don’t reopen following a major disaster.  Protect your finances with business income insurance.

Plan ahead and take action today – get business insurance and maximize your business’s chances of survival. Here is a five-step plan you can put in place now to protect your business against any potential loss of income in the future:

Evaluate Potential Threats

The first step to protect your business income from unexpected threats is to consider where potential threats may arise. Natural disasters, power failures, theft and vandalism are possibilities. Lawsuits and data breaches also pose a significant threat to businesses today.

Think carefully about the type of business you have, the location, your leadership team and the key factors critical to your business’ operations. Brick-and-mortar businesses will face some different threats than online businesses, for example. Some things to consider:

  • Do customers visit your physical location?
  • Is your home, office or store in an area that is exposed to unfavorable weather conditions, prone to floods or at greater risk of crime?
  • Where do you keep your inventory?
  • Do you employ staff?
  • Do employees work on-site or virtually?
  • What might prevent employees from showing up to work?
  • Who are your suppliers and what kind of threats might they be exposed to?
  • Do you rely on large data servers?
  • Where do you keep customer information?
  • How do you process payments and account receivables?

These are all important questions to ask as you examine what might halt your business operations and result in a loss of income.

Identify Assets and Dependencies

Next, take inventory of everything your business owns as well as anything that generates income. These assets largely fall into three buckets: tangible assets, intangible assets and people.

Tangible assets include those your business owns or uses to operate such as land, buildings and office space, vehicles, tools, computers and electronics, merchandise and inventory. It also includes anything you lease for additional income, such as equipment or real estate.

Intangible assets include reputation, intellectual property, strategic partnerships and data. These are all core to your business and can affect your profitability if they are compromised.

Finally, people are one of the most important assets for any business. Identify key staff members (including yourself) that you can’t afford to lose on short notice, as well as how many staff members you need on any given day to be operational.

Determine How Much Business Insurance Coverage You Need

Ultimately, the most effective and prudent way to protect your business income against unforeseen events is to get business insurance. There are many different types of business insurance, and if you already have a policy, read it carefully and make sure it covers the threats and assets you identified in steps one and two. If you do not have insurance coverage, a business owner policy is a good place to start. To ensure you are fully covered, it’s best to work with a qualified insurance agent who can help you determine the type and amount of coverage you need. Don’t forget to ask them about business interruption insurance as well.

Create a Business Continuity Plan

Now that you have an idea of potential threats to your vital assets, it’s time to put in place a continuity plan. Identify the key resources and business functions you would need to get up and running quickly, perhaps in a limited capacity, as well as who will carry out each activity.

A good first step is to compile a contact list of everyone you’ll need to reach in an emergency, including management and staff, and any customers, suppliers, insurers and emergency workers. Compile a list of service providers whose assistance might be needed in an emergency situation, such as plumbers, utility companies, electricians and IT specialists. This information should be posted in a prominent location and given to all staff members.

Then, build a set of procedures to be followed to keep your business operational during a disaster or setback. For example, create a checklist for what to do in the event of fire or in the event of a data breach. These will vary depending on the type of business you run, but safety should always come first. Then focus on staff, customers and how your business can operate at a reduced capacity.

Create a Recovery Plan

After the continuity plan is in place, consider how you can move forward beyond just the minimums. You may need to develop a communications strategy to contact customers or suppliers in order to update them on the situation and reassure them so they stay with you.

For example, as unfortunate as it may be, communication from companies that experienced data breaches has become familiar to many. These communications are important to show transparency, avoid rumors and preserve a company’s reputation and help rebuild trust. Customers want to know that the business entrusted with their vital information has taken responsibility for any problems and is doing everything possible to secure their personal information and fix the breach or attack. In such cases, it’s a good idea to back up your digital data in a cloud-based server and duplicate any data contained in hard assets. Off-line, copy vital paperwork and keep it in a secure location.

Make sure that your business is equipped with business income insurance, also known as income protection insurance, in case you are faced with any potential threat. Few small businesses have dedicated risk management departments. But taking risk management seriously and following these five steps could save you from a potentially disastrous situation.

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