ONTARIO STOLEN COMPUTER CAN CAUSE SERIOUS PROBLEMS FOR SMALL BUSINESS CORPORATIONS http://www.theglobeandmail.com/servlet/story/RTGAM.20061018.wsrsmallbizrisk18/BNStory/specialSmallBusiness/home


Failed to plan? Then plan to fail

ALLISON DUNFIELD
From Wednesday's Globe and Mail

When Chanel Yang and her partner opened an upscale winemaking store in Vancouver two years ago, they thought their business plan was perfect.

But just a month after it opened, L'Amour du Vin, which had an alarm system on its doors, was broken into and a computer stolen through an unarmed window.

"That's the one thing in my business plan, I didn't plan [for]," Ms. Yang said.

It was her first lesson in small business risk management: You've got to consider absolutely everything.

Small business owners are natural risk-takers. It takes courage, drive and just plain guts to turn a tiny idea into a full-fledged company.

But as recent events, such as hurricane Katrina and the SARS outbreak, have taught us, catastrophes can strike at any time. Although entrepreneurs may be savvy, they may not be properly prepared for the unexpected.

In fact, many businesses that do experience a major crisis never recover.

Catherine Swift, head of the Canadian Federation of Independent Business, cites a U.S. study by the Gartner Group and the University of Wisconsin which found that 43 per cent do not reopen after the event. A further 29 per cent will close within two years, the study found. She believes the situation would be similar in Canada, though no data is available.

Despite the evidence that no area is immune, Ms. Swift said the problem is that many Canadian entrepreneurs still don't think disasters such as a major flood or a health pandemic can happen here. Therefore, they don't do a proper risk assessment.

"We feel things happen to other people -- it's human. Naturally, we never think it's going to happen to us," she said.

Ideally, an entrepreneur will formulate an emergency plan before the company ever opens its doors. That means brainstorming about all possible risks and devising a strategy to address them, Ms. Swift advises: "Have a plan in place, make a written plan, share it with key staff."

She recommends downloading an emergency-plan template for free from websites such as the Canadian Centre for Emergency Preparedness (http://www.ccep.ca).

Next, ensure that the business is protected against possible lawsuits, that it has the proper insurance based on the risk assessment, and that all data is properly backed up and protected.

Seeking legal advice is something that most small business owners never do before they find themselves in legal hot water, said Andrey Pinsky, a Toronto-based business lawyer who specializes in the needs of small- and medium-sized businesses.

He believes having a lawyer should be mandatory. "You have to select a lawyer who understands where you want to get, who understands your business."

Because staying afloat can take up most of a small business's financial energy, especially in the first few years, Mr. Pinsky said people sometimes try to save money by using "do-it-yourself" legal documents. But most don't have enough legal expertise.

He said he frequently gets calls from business operators who have made only oral agreements with a partner. When the start-up "honeymoon" is over, claims and counter-claims start to fly and the parties file suits. His advice? "Put everything in writing."

Another basic area for small business is having adequate insurance. Experts say it is crucial to buy policies to protect your business against the most likely risks, if you can't afford absolutely every type of insurance, and to update those policies when your business changes or grows.

One type of coverage entrepreneurs should look into, according to Lindsay Olson, Pacific region vice-president with the Insurance Bureau of Canada, is business interruption insurance. What it does is help cover the costs of your business, including payroll or stock replacement, during the emergency situation.

There are several types of business interruption insurance. A policy can be either a "named perils" type, or "all-risk" type. The named perils cover all losses listed in a business owner's policy, while the all-risk type protects businesses against losses that were not covered in a policy. Other types will continue to pay out until the business is back to its pre-catastrophe level of income.

Some policies depend on risks based on, for example, the location of a business, such as an earthquake zone. Ms. Yang has one such policy, because her store stocks bottles of wine that could be damaged in a quake. She advises shopping around to get the best price on such specific protection.

And there are yet other, very specific types of insurance. For example, Mint Canadian Specialty Underwriters in Toronto introduced a policy in June called Outbreak Contingency Cover, which is meant to protect small businesses for 30 days in the event their doors are closed by a public health official because of an emergency such as avian flu.

"It's not necessarily a panacea . . . but it will afford some sort of economic cushion in the event that it happens," said Rob Lee, the company's chief underwriter.

Perhaps one of the most frightening risks a small business can face is the loss or theft of computer data. Businesses must be able to protect not only their own information but also confidential customer data.

Small businesses should have their data backed up on hard drives, and should consider an off-site date storage company, such as Xdrive or Iron Mountain. Businesses install the storage companies' software, which sends the data to secure websites for storage. For a small company with five to 10 computers, Iron Mountain charges a fee of about $90 (U.S.) a month.

Entrepreneurs can also purchase "electronic data protection systems insurance" said Bret Meyers, a Toronto-area insurance investment consultant.

He said this type of policy helps defray the costs of replacing the information.

If small business owners properly consider the risks they may encounter, they'll be able to bounce back from any emergency quickly and avoid becoming a statistic, said Ms. Swift of the CFIB.

"Over the last 10 years we've had floods, ice storms -- I think a lot of people have realized that they're not invulnerable."