Can businesses afford to plan for disaster recovery ? In a word, yes.

In several words: You simply cannot afford not to plan.

As this hurricane season has vividly illustrated, the business you have worked so hard to build can be wiped out almost instantly by a flood, fire or other disaster.  If you do not have a recovery plan in place when disaster strikes, you probably will never recover.

Let’s look at the facts:

• 93% of companies that experience a disaster without a recovery plan close within 5 years. Why? Cash flow. Your insurance will keep you running (more like limping) through your business day, but once the money runs out you better know who your customers are going to be. Without a plan, you have lost your contact list, so you don’t know who owes you money, who is close to signing deals, and who you are targeting for future deals.  In short, your cash flow has dried up and you have nowhere to turn!

• 50% of companies that lose their critical business systems for more than 10 days never recover. Why does this happen? Clients don’t have the brand loyalty that they had a generation ago. If you aren’t open for business, they will quickly find someone else.  Let’s use a scenario… You’ve lost your toothbrush… When you go to the store, you find that there aren’t any more of “your brand”, when you ask what happened, the clerk tells you their shipment didn’t come in and won’t for several days. Are you going to wait for your toothbrush? Not likely, you are going to pick another one and maybe like it more.  You have just changed brands and they have lost a customer.  Are you willing to take that chance with your existing customers ?

• Almost 60% of businesses of all sizes in this country consider customer services and competitive advantage to be the factors most critical to their company’s survival.  With so much advertising and market saturation, it is very expensive to win a new customer to your solution; it is much cheaper to keep your existing customers happy. If you aren’t open for business, or have limited services with no warning, your customers are going to find another solution. We have become an “Instant Generation”; if you can’t supply a service or product instantly, we will find someone else who can.

• According to the FBI, for every eight hours of down time, you will lose one half of a percentage point of market share (0.5%), and it takes 3 years to win that market share back!

What Should be the Goal of your Efforts ?

The goal of your business continuity efforts will be to minimize this downtime, limit your losses and prepare you (and your company) for continuing through this period of trouble.

In determining if you can afford to start, complete or maintain your Business Continuity Plan, there are several keys factors that you have to determine:

First, what is your Recovery Time Objective (RTO) ?  By what time must you recover? Your RTO will determine how much time you have to get everything back up and running. This will help you determine the amount of resources you are going to need to allocate when planning your recovery budget. For many small businesses, it is very important to be the first back in business. This means that, when there is an area-wide disaster, such as a snow storm or flooding, they want a plan that will permit them to open for business as quickly as possible. They know  that, in this way, their customers will see that they take their business seriously. As they will gain customers from other companies who didn’t have the foresight to have a good plan in plan.  They know that time is money !

Second, there is a feeling in Business Continuity Planning that “with enough money, you can recover anything”. Unfortunately, most of us don’t have that option, so you have to determine, for your company, which services are key to your success and how much will you lose (customers, prospects and money) if you don’t have those services available. The services that are crucial to your success have to be back in operation first, but be careful; sometimes the crucial operations aren’t the most obvious ones.

Third, you have to be prepared to have people go home and wait by the phone. Although they are not generating revenue for you (or helping in the recovery) you know where they are, they are available when needed and they are not distracting your core recovery.  While these three factors might seem obvious, you will likely be so swamped with decisions to make, you probably won’t be able to remember your home phone number in an emergency.

As an example of what can happen, we recently worked with a small development company that experiences frequent power outages. They do have backup batteries but no generator. Fifty people, most of their staff, cannot continue to work without power. We calculated how much direct salary money they were losing with the power outages. The total cost was $125,000 per year ! And that didn’t even include employee benefits, lost sales or lost profits. They took corrective action so that they can continue to work and produce.

How to Calculate How Much a Disaster Could Cost You

It is easy to calculate a gross dollar-value for how much a disaster could cost you. Divide your gross annual revenues by the annual number of hours of work for your business (typically 1,750 or 2,000). The result is the lost revenue per hour.  The size of that number will surprise you.
In many cases, we have been able to develop plans that were cost-effective (the savings in insurance premiums often are enough to pay for the plan) and often these plans gave the client another marketing point to differentiate themselves from the competition.  If you can guarantee to your customers that you will be open for business, regardless of the local situation, they are more likely to remain as your customers, more likely to tell others and it is most likely that you will pick up customers when others are facing a disruption of some sort.
The world is becoming a global economy and we are no longer competing only with our neighbors; we are now competing with the best services, products and best companies from around the world!  Your customers aren’t going to wait for you to return to operations (while their deadlines expire); they are going to look for a solution that allows them to remain competitive and operating at full capacity.  That is what you would expect from your suppliers, so why should your customers expect less?

Ensure your market share remains (or grows), keep your customers happy, keep your investors happy and keep your doors open. You can’t afford not to.