8 keys to master a natural disaster

By Bob Clements

When tornadoes, hurricanes, floods and blizzards strike, it’s the OPE dealers that people turn to, to help return their lives to normal. Whether it’s chain saws, generators, chippers, pumps or snow throwers, as a dealer you know how important it is for your customers to plan ahead and be prepared for the worst-case scenario.

But what if the disaster happens to you? Sure, you have the equipment available to get rid of fallen trees and flood waters, but that’s not all you need to be prepared for. As a business, are you prepared for a disaster? What would you do if tomorrow you had a fire, flood or storm that shut your business down? How would you take care of your customers, your employees, your vendors and your bank if a disaster were to strike your dealership? 

Even a small-scale disaster can mean damaged inventory or damaged customer equipment and potential lost sales, while a major catastrophe might mean your dealership is closed for weeks or even months. 

In this article, we are going to take a look at the eight areas you should focus on to keep those temporary setbacks from becoming permanent. 

1. Be prepared

The Boy Scouts have a motto, “Be prepared,” and it has served them well since the early 1900s. From their perspective, it means to be prepared in both mind and body — in mind, by having thought-out beforehand any accident or situation that might occur, and in body, by being trained and physically able to react to the situation.   

The Boy Scouts have it right — not only for themselves but for us — as we, too, need to be prepared in our business. It just makes good sense to be proactive when it comes to a disaster than to have an event occur and then fumble around trying to make the best of a bad situation. Make a commitment today to be prepared for tomorrow. Commit to investing time and energy into preparing your business for the unthinkable. 

2. Create a plan

The first element of being prepared is to take the time to do a simple assessment on what type of natural disaster might happen to your business based upon your geography. 

Although theoretically anything can occur anywhere, in Kansas City, Mo., we won’t spend much time on planning for volcanic eruptions, yet there are 169 volcanoes in the United States and more than 150 in Canada. If you own a dealership in Alaska, California, Hawaii, Oregon or Washington, 18 of the 169 are in your area and have been designated as “very high-threat volcanoes” by the United States Geological Survey, so it might be prudent to give some thought to what would happen if one erupts in your area and what that would mean to your dealership.

Floods and fires can occur anywhere, so the question you have to ask yourself is, “Am I ready to deal with a disaster tomorrow if it happens tonight?” If you can answer “yes,” congratulations, you are way ahead of the game. If you are like most of us, the answer is “no,” so now is the perfect time to begin putting a plan in place. 

Take time to make a list of every possible disaster that could affect your business. Write down each potential situation and what the key considerations and risks might be to you and your business. Your goal is to work through possible scenarios ahead of time, so you and your employees will have an idea of what might happen to the dealership and what steps you will need to take to overcome the disruption. I promise you that it will be a lot less expensive if you take the time to get all your ducks in a row now, than if you wait until you get hit and have to figure out what to do after the fact. 

3. Protect your data                                                       

If you are like most dealers, your customer data — accounting information, customer lists, equipment and parts inventories, and customer service history — is located on a server someplace in your dealership. 

Although we all know how important it is to back up our data every night, if the backup is located at the dealership — and something happens to destroy the building and both the server and the backup — all of your effort will have gone to waste. Everything in your dealership that is destroyed can be replaced, with the exception of your data. 

Think for a moment about the amount of time over the years you have invested in collecting information specific to your customers, the equipment and parts they have purchased, as well as their payment records and service histories. If it were lost tomorrow, no amount of insurance you have would be able to bring it back. Once it is destroyed, it is gone forever. Your data is, without a doubt, the most valuable aspect of your dealership.

Because of the value, it is vital that you protect it by backing your data up to an outside location and preferably one that is in a different city. It’s not out of the realm of possibility that you could have a disaster that impacts your entire city — just ask the dealers in New Orleans, after Hurricane Katrina struck five years ago. Even though you have a backup that is remote, you may still lose the data if it is not in a different part of the country. If this isn’t an option, then, at the very least, back up your data on a removable disc regularly. Make taking the backup copy home with you a routine activity and keep your backup data in a safe place.

4. Keep communication open

Create a communication plan for emergencies. This identifies first and alternate people responsible to let vendors, customers, partners and creditors know about your status during and after the disaster. In most cases, taking the time to communicate to key people will more than make up for delays in getting equipment to customers or making critical payments to your vendors or your bank.

Also, designate a person to be responsible for communicating with employees. If an evacuation is called, employees will need to be told where to meet if you are going to try to conduct your business from a temporary alternate location.

Taking time to create a communication plan ensures that you will be able to connect with your employees in an emergency, and they will have plans on how to communicate with their families. 

Make sure that emergency contact information is on file for all employees. This information should include contact information for the employee, as well as at least one family member or close friend. It’s a good idea for key employees, such as your office, sales, parts or service managers, to have copies of this information not only at the office, but also at their homes. 

If you have a voice-mail system at your office, designate one number that will play recorded emergency messages. Confirm that your employees know to call this number if there is an emergency and they’re not in the office. Check to be certain that the information on the message is up-to-date.

5. Evaluate your insurance

No matter the size of your dealership, ensure that you have sufficient insurance coverage to pay for at least six months of the direct and indirect costs of a disaster.  

It’s important that you take some time to meet with your insurance agent and make certain that you understand your policies. Be aware of what is covered, what is not covered, and what are your deductibles and the limits of your policies. 

Talk to your agent about having sufficient coverage to pay for any indirect costs of the disaster. Your coverage should include the disruption to your business, as well as the cost of repair or rebuilding.

Now would be a good time to also evaluate your property insurance policy. If you have made any improvements — either internally or externally — make sure you have coverage to take care of the additional value. Keep in mind as you consider your policies, there may be limitations on what the policy will pay for certain items. So, if you need higher amounts, discuss this with your agent.

As you are talking with your agent, ask about your coverage for flood and earthquake damage. In most cases, your standard property insurance policies exclude both types of disasters. Check with your local, city or county government to see if you are located in a flood zone, and, if you are, you may have to buy insurance from the National Flood Insurance Program. 

Don’t forget to protect yourself against business interruption. Business interruption insurance covers the profits your business would have earned, based on your financial records, had the disaster not occurred. It also pays for the continuous operating expenses such as payroll even though business activities have come to a temporary halt. 

Consider extra expense insurance that will reimburse you for what you spend, over and above your normal operating expenses, to avoid having to shut down during any type of restoration period. 

Finally, ask your agent about covering the costs of your service techs’ tools. If your insurance doesn’t cover the cost of their tools, make sure the techs understand they should carry their own insurance to cover the replacement cost in the event of a flood or fire.

6. Find an alternate location

The next time you are driving around your community, take a look at buildings and properties that might work for your business on a short-term situation. If you are faced with a flood or fire, it could be weeks or even months before you would be able to get back into your location. As an OPE dealer, if a disaster happens during your slow season, a couple of months of not being able to do business would probably not be fatal. However, if that same disaster happened during the peak of your busy season, it could potentially do significant financial damage to you personally.

As you think about a short-term location, keep in mind that you are trying to find a place that is located far enough away from your existing location, so that it wouldn’t be impacted by your situation. It’s also important to make sure that your alternate location is on a different part of the electrical grid in your area. 

7. Prioritize

Don’t go crazy and spend more money than you need to in an effort to protect everything. It’s important to take time now when you are not under pressure to weigh protection costs against your ability to survive a disaster or business disruption. Don’t feel you have to protect everything; take time to prioritize what is business critical and what is nice to have but not essential.

Get your employees involved in the process. Ask your techs and service manager to think about the need to create a temporary shop at a different location and to outline for you the minimum tools and equipment that would be required to produce work. 

Do the same with your parts people and manager. If they were forced to create a temporary parts department, what would they need? If all their parts were destroyed and tomorrow they would need to come up with a minimum parts list to get their department up and going, what would they order and who would they contact to get the parts expedited to the new location so you could quickly be up and running again?

8. Take time to practice

Nothing great can happen without practice, and the disaster plan for your dealership is no exception. As silly as it will seem to your employees, come in some morning and announce that a fire happened last night, and everything in the dealership was destroyed. Let them know that you now need to reset your business at a temporary location, so you can keep operating until you can rebuild at your current location. Ask them each the question, “What is the minimum that you would need to make that happen?” 

Give your service, parts, wholegoods and bookkeeping departments a day to come back with a list of what they would need to relocate and to have their department up and functioning again at the most basic level. That list should include the tools, equipment, parts and data that would allow you to start making money. Gather the lists and set aside time to meet with all your employees to discuss what each department came up with and ways to help the dealership be prepared for that day if it were to ever come.

While the goal of a disaster plan is to get you back up and running as quickly as possible, your vigilance and diligence in preparing your employees before the fact, will go a long way toward determining how you survive should a disaster take place at your store.

Taking time to think through the process and practice with your employees can pay off big if the unexpected ever happens to you. 

 Bob Clements is the president of Bob Clements International, Inc., a consulting firm that specializes in the development of high-performance dealerships. His organization works hands on with dealerships throughout North America, helping them attain the personal freedom and financial wealth all owners strive to achieve. For more information, contact Bob Clements at (800) 480-0737 or bob@bobclements.com or visit his Web site at www.bobclements.com.