Tales of Woe and Disaster
by Judith Broadhurst

A freak occurrence, natural disaster, or theft can devastate your business, so it pays to take preventive measures.

See the end of this article for a Better-Safe-than-Sorry Checklist compiled from experts' advice

Mike Ward remembers one of the fires he helped combat as a fire marshal in Fairfax County, Virginia, because it seemed to be such a fluke. Yet it just as easily could have happened to him — or you.

A car crashed into a utility pole, which knocked out the power to a neighborhood where a couple ran three data-dependent businesses from their townhouse. The blackout caught them in the middle of online research for a project on deadline, so they went to the library to finish their work.

That could have been the worst of it and the end of this story. But the couple forgot about the snack they had put in the toaster oven just before the power failed. When the juice came back on, so did the toaster oven. With nobody home to notice, the sandwiches caught fire and burnt up $7,000 worth of the kitchen, even though firefighters quickly doused the blaze.

That was bad enough, but there's more. Their office was in a spare room directly above the kitchen, so heat from the fire damaged the data disks and destroyed the computers. They had no paper copies and no data backups stored offsite. They lost all their data, worth thousands of dollars.

"I operate a knowledge business from home, part-time, too, so that one really made me think," says Ward, who is not at liberty to divulge the victims' names.

Data backups give you only minimal protection

Precious few business owners take the precautions to protect themselves against potential disaster — be it flood, fire, theft, hurricane, or earthquake. If anything, their only concession to the chance of catastrophe is to keep backup files. Even then, they do little to protect the backups against damage. Or they insure their business equipment, but do little to insure the files.

But flukes such as Ward describes can happen anywhere, anytime. For instance, when Roz Ellis hired someone to paint her Manhattan apartment, a worker set a can of paint on the pilot light of her gas stove, and whoosh! "The entire kitchen was gutted," Ellis says. "Gone, like it didn't exist." A simple paint job turned into an ongoing nightmare.

One of the painters was badly burned but survived. Ellis's event-management service, Elegant Events, almost didn't. Her paper records were damaged by smoke. She carried only $14,000 in insurance for a $37,000 claim. Her insurance didn't pay enough to cover temporary lodging, which forced her to stay in her home with no place to cook, soaked carpets, and soot-blackened walls. The smell of smoke sickened her stomach, and the constant reconstruction racket and comings and goings of workers jangled her nerves.

She suspended her usual marketing efforts. That was last August. By the time she was able to use her office again, in November, the booking season for holiday parties had passed. Ellis estimates she lost close to $50,000 in business during her busiest time of the year. To make things worse, she still finds ashes from the fire in her kitchen cabinets. "It's not a nice way to live," she says. "I wish I had had more insurance."

Good insurance isn't good enough

But even a good insurance policy won't necessarily protect you against business upheaval. Raymond and Marjorie Jassin had separate homeowner's, business, and computer insurance policies that adequately covered the law-library management service they run from their home on Long Island (along with two in-house and 20 outside employees). They had invested in a hardwired burglar- and fire-alarm system that rings into a central monitoring station. Still, after a fire gutted their house on New Year's Day last year and melted all their fax machines, copiers, and computers, it was eight months before they could operate normally.

"We wished we had taken a better inventory of our personal belongings," says Marjorie. "Taking that inventory in the middle of winter, in a dark, burned-out, wet home was the most traumatic part of the whole experience."

The day after the fire, the Jassins set up shop at the kitchen table of one of the company's vice presidents, routed all phone lines there, and began to put things back together. Miraculously, although their computers had basically been destroyed, they were able to recover data files from one hard drive.

"One of the things that we hadn't anticipated was the installation cost of all the equipment," says Ray. "Despite all our insurance, we were not covered for that. You do things throughout the years. As you upgrade one piece at a time, the cost is minimal. Altogether, we incurred a $7,000 or $8,000 loss in installation alone. But we survived both the fire and the economic slowdown, so that's a good test of a business."

A firestorm, a quake, a hurricane

Freak occurrences are bad enough, but in widespread natural disasters, much in the news the past few years (Hurricane Hugo in South Carolina, Hurricane Andrew in Florida, the California earthquakes in 1989 and 1994, the East Coast's vicious Northeaster in 1993), the destruction is often more monumental.

Peter Stackpole, a well-known San Francisco-area photographer who has worked for Life magazine, lost his home, along with 20 years' worth of negatives, in the Bay Area firestorm in 1991, known as the Oakland Hills Fire. "I rescued about five small but heavy metal containers that happened to miss the heat of the fire," he says. "But the rest turned into rivers of metal flowing down the hill. Everything just melted."

Stackpole took a temporary residence across the San Francisco Bay and liked it so much he eventually bought it. Besides the five containers he rescued, he retrieved some negatives from Life magazine and others from a book publisher. He also lost a lot of cameras in the fire, but says: "I never want that many cameras again, anyway."

Lynn Piquett, a graphic designer, lost everything when the Loma Prieta quake hit Santa Cruz in 1989. Her office was in a landmark brick building in the downtown historic district. After the quake, she found pieces of her files drifting around the streets, but officials never allowed her to enter the building again before it was demolished.

"There were a few large things that they pulled out of the rubble, but some of it, like a four-drawer file cabinet, never showed up," says Piquett. "I think it got hit by the wrecking ball. The SBA turned me down for a small-business loan afterward, because I didn't look like a great risk, at least on paper." Her friends in the arts community held a benefit to raise money for her, and she received a grant from the Arts Recovery Council, a temporary agency funded by the National Endowment for the Arts, with matching funds from foundations.

"Luckily, I had my talent, so all I really needed to be back in business was a pencil, a drawing table, and some paper," says Piquett. She moved her office into an extra bedroom of her rented wood-frame house and took out business insurance, which she didn't have before the quake.

What can happen when you try to ride out the storm

John Koziol, president of Nexgen Computer Corporation, a computer programming group, sent his family away while he rode out Hurricane Andrew in his home in Cutler Ridge, Florida. He expected some winds and possible flooding from a storm surge.

"I was 10 feet above sea level, and I have a two-story house," he says. "My logic was that my equipment was on the first floor, and I couldn't possibly waterproof things. I thought if I stayed, I could react as things developed. Boy, was I wrong."

Koziol got stranded upstairs, isolated from the equipment he had stayed to protect, when the hurricane whipped into his neighborhood. It came on so suddenly and so fiercely that the doors blew off their hinges and knocked him down twice. He survived by using a mattress to create a cave in a closet. Only afterward did he notice that the sheetrock of his bedroom walls had disintegrated into powder.

Koziol and three employees had worked from his and his father's homes before Hurricane Andrew. "We knew our bases of operation were gone (his father's house was also destroyed) and weren't going to be livable ever, or for quite some time. We had a little bit of cash saved up, so we decided either we had to fold the company or take our reserves and take our chances," says Koziol.

He moved the company into an office building. "The way we were set up, with the home offices and everything distributed, worked to our advantage," says Koziol. "We were probably back on our feet much, much faster than anyone else in that area — in less than a month. And our revenues and staff more than doubled within three months. I preferred the home office, but I knew that we would eventually evolve out of it. The hurricane jump-started that evolution."

Another Hurricane Andrew survivor, Kathy Ledford, lost more than her house; her entire market was "uprooted, destroyed." As a Tupperware manager — she sells housewares through parties in people's homes — Ledford has seen her monthly sales drop from $4,000 or $5,000 a month to $400 or $500 a month.

"Most of my customers or potential customers lost their homes and could care less about housewares," says Ledford, who lives in Homestead, Florida and had sold Tupperware for 16 years. "In addition, the hurricane destroyed all my customer records."

Her husband, David, a plumber, lost equipment and tools when the storage shed in their backyard was trashed and vandalized. He has since built a new shed, and the Ledfords are now living in a 32-foot trailer on their lot while their house is being rebuilt. Kathy has taken up a new line of work: selling kitchen cabinets to people who are rebuilding.

"I'm not giving up on my old business yet. I'm still going to meetings and trying to keep positive. But the whole thing has left a real bitter taste in my mouth."

Contingency plans for flukes or bad storms

Lest these tales of woe leave you feeling helpless, we talked with two disaster recovery and contingency planning consultants. Joshua Lichterman, president of Emergency Management Group, works from his home in Berkeley, California. Philip Jan Rothstein's home office is in Ossining, about an hour outside of New York City. They talk mostly about protecting yourself against flukes or bad storms, more than act-of-God natural disasters.

Licterman advises, "The first thing that anyone should do is a hazard assessment and vulnerability analysis at their site. That involves asking, 'What could happen here?'" And that, he says, includes considering what would happen if there were a chemical disaster if you're near a freeway or industrial area, as well as how to adapt if the utility, transportation, or communication systems are down for days or weeks.

Licterman suggests making contingency plans with other home-based businesspeople in your network. Find ways you could share office space and equipment temporarily, either at the least-damanged home or someplace out of the area if the whole region is affected. The longer you suspend operations, the greater your risk of losing your market niche or going under.

"The National Fire Protection Association warns that 30 percent of all business that have a major fire go out of business within a year, and 70 percent fail within five years," Lichterman cautions.

Practical protection for a pittance

"The best thing anybody can do is use discretion," says Rothstein, who can reel off a litany of practical things to do for a pittance. "Probably 90 percent of what you need to do is inexpensive," he says. "Look at the commonsense things. Put your computer in a room where nobody can see it, or put miniblinds on the windows to protect against theft.

"The highest risks are fire and water damage. If flooding is an issue, raise things off the floor. If you've got a direct threat, like your furnace on the other side of the wall or the bathroom above or right next to you, that's not where you want your most critical business records to sit. As for far, Rothstein says: "There's a name for those piles of papers and magazines: kindling." File them in a metal cabinet, store them offsite, or toss 'em.

"If people assume that business-equipment insurance will protect them, they're wrong," Rothstein adds. "All they've got is a bunch of new machines arriving via UPS — you can't replace lost data. If you suffer a major calamity or a theft, your equipment's the least of your worries. The critical loss is your data, your files.

"Beyond that, consider what else you could lose, like your $25 or $48 backup tapes, the forms and letterhead you'd have to reprint. Go through your normal day at work, and think about every piece of paper you pick up, everything you type on your computer, every fax that comes and goes, every phone call you make or take. Think what it would take to reconstruct all that intelligence if there were a fire or if your basement office flooded."

Let's just not think about such things

Unfortunately, most people don't think and don't want to think about disaster prevention or recovery — either before or after the fact. The Jassins, fair to say, had carefully considered the possibility of disaster and were already well-insured before fire ravaged their house. Because the insurance didn't cover all their equipment replacement costs, they increased it after the fire. But none of the others we interviewed about their losses have done much to protect themselves against future calamity. As Lichterman says, denial feels more comfortable.

"I don't want to have to live my life being scared, preparing for earthquakes all the time," says Lynn Piquett. She now keeps her artwork in plastic sleeves and has taken out a business insurance policy, but that's all she changed — except that she works at home instead of in a commercial building.

"If I happen to be home and there's a big storm, I shut down," says Steve Burt, who runs Résumé House in Gainesville, Florida, and lost a board in one of his computers to lightning. "As far as any other precautions, I haven't done anything. I just hope that it's true that lightning doesn't strike twice."

Better-Safe-than-Sorry Checklist

This list of tips to protect your office against potential disaster was compiled with advice from Joshua Lichterman, president of Emergency Management Group, in Berkeley, California; Philip Jan Rothstein, of Ossining, New York; Jeff Freeman of Front Porch Computers in Chatsworth, Georgia; and Bill Petersen of State Farm Insurance in Laguna Hills, California.

• Insure your business equipment and records adequately and re-evaluate annually or whenever there's a major change.
• Take out a separate business policy that covers general liability and the full replacement cost of equipment and furnishings, including computer hardware and loss of use of your home office. Make sure you understand whether or not "replacement" value means full replacement value, or if operating a business from your home could void coverage.
• Document your possessions (including serial numbers, purchase dates and prices) with receipts and detailed descriptions as proof, with photos of the large or costly items. Periodically send an updated copy to your attorney or a relative in another state, or store it in a safe deposit box.
• Do regular backups of computer data and store them in a safe place.
• Use UL (Underwriters Laboratory)-certified transient voltage surge suppressors on your computer and other business equipment.
• Ensure that all doors and windows lock securely.
• Conceal expensive equipment so that it's not easy to see through windows.
• Clean and organize your office frequently so piles of paper won't create a fire hazard.
• Place fire extinguishers and smoke detectors strategically throughout your home. If you already have smoke detectors, consider upgrading them to smoke-heat detectors, which are more sensitive.
• Arrange furniture and equipment to guard critical items and records against leaks, floods, crashed windows, heavy vibrations, or earth tremors.
• If you have to file an insurance claim, use an independent appraiser and adjuster rather than one sent by the insurance company.
• Store copies of data backups at alternate sites or in safe deposit boxes, either of which is cheaper and more efficient than special data-loss insurance.
• Install a hard-wired security system with an audible burglar alarm.
• Ask your insurance agent to add a rider covering your most critical records, including lists of customers, prospects and suppliers, plus corporate accounting and tax records.
• Hire specialists to check your wiring, plumbing, and chimney construction, as well as the structural soundness of your home.
• Buy a generator as a backup power supply.
• Install a sprinkler system.
• Keep a backup heater that doesn't require electricity or natural gas.

Copyright © 1993, Judith Broadhurst. All rights reserved.
Published in Home Office Computing magazine, March, 1993.

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