Is Your Remodeling Firm Prepared for Disaster?

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Like a menacing horror movie monster, disaster can morph into many unexpected forms. Hurricanes, tornadoes, terrorism and wildfires have wrought widespread devastation. It’s way too easy to become complacent and believe that a disaster, including even the crash of a critical computer hard drive, could “never happen to us.” As the old saying goes, $#!+ happens.

When it happens, it can wreak havoc on your remodeling business. Experts in the field of business continuity and disaster preparedness say that no matter what the cost or effort, it pays to be prepared.

Think about the consequences that a disaster might have on your business technological network. How many pieces of information are generated for each client’s remodeling project? How crucial are those contracts, work orders, schedules, payroll and tax records to your business? Imagine the impact if that information were lost.

Are remodeling firms prepared?

No survey has been done to determine the level of preparedness of remodeling or home building firms, but two recent surveys on business continuity and disaster preparedness indicate that businesses of any size may not be adequately prepared, if prepared at all.

The Ad Council on behalf of the U.S. Department of Homeland Security’s Ready Business group surveyed small businesses in October 2005 and found 92 percent of respondents said they believe it’s very or somewhat important for businesses to take steps to prepare for a catastrophic disaster. However, only 39 percent said their company has a plan in place in the event of such a disaster. Why? While many respondents acknowledge the value of preparedness, time, workforce and money constraints prohibit them from developing a plan.

In March 2008, Aberdeen Group [1], an information technology consulting agency, surveyed more than 150 end-user organizations, and results prove that Best-in-Class IT organizations have infrastructures that support rapid recovery of data and applications with minimal or no downtime. That assures business continuity even in the face of a severe event. While 62 percent of all the companies surveyed experienced between 1 and 5 business interruption events in the last 12 months, only 49 percent of the companies surveyed have had a business continuity strategy for more than 2 years, and 34 percent of those have yet to implement a solution.

“It’s hard to imagine that a company wouldn’t have a data backup system, but just backing up data alone doesn’t constitute a disaster recovery strategy,” says Jeffrey Hill, senior research analyst in Aberdeen’s Data Management and Storage practice. “In order for a recovery strategy to be effective, it needs to recover the right applications and data in a timely fashion. Put another way, how long an outage can a business tolerate before there is a tangible impact on operations?”

Mark W. Kinsey, president of Kinsey Consulting [2], based in Doylestown, Pa., is a Certified Remodeling Associate and Construction Risk Insurance specialist. His business focuses on contractors, both large and small. In his years of experience working with remodeling firms, he has found that most “don’t have a clue” when it comes to business continuity and disaster preparedness.

“It is absolutely critical to have a plan in place,” Kinsey maintains. “Think of your customer service, or your employees. What will they do should any type of disaster occur? Look at the volume of work you do on a daily, weekly or yearly basis. Imagine how much you would lose if your computer systems went out and weren’t backed up. What would happen to your plans, your proposals, your jobs completed? How are you going to do your accounting or your ordering? Records are a key component to any business, and they need to be protected.”

For business continuity planning purposes, Kinsey has a crisis planning worksheet that he gives to his clients. “It all starts with the basics. The questions are simple, but the answers can be very complex,” he says. “Each individual business is different, and the answers to these questions will be different for every business. It boils down to the impact that any type of disaster has on business interruption and business expense.”  

Kinsey says business continuity planning is an exercise that the C-suite (senior executives) needs to go through. “It can be fun but difficult,” he says. “It’s an exercise of hard decisions and 'what if’ scenarios that all business owners should go through.”

While having a plan in place might not get you any type of discount on insurance, Kinsey says that having one will put you in a much better light in the eyes of underwriters that provide coverage for businesses. “Having a business continuity plan in place shows underwriters that you are prepared to mitigate any loss should it occur,” he points out. “And that’s a good thing.”

Does Kinsey’s firm have a plan in place? “Yes, we do,” he says. “But we’ve been extremely fortunate. In our 35 years in business we’ve never experienced a major disaster.”

Organizations can help

NARI [3], the NAHB Remodelers Council [4] and the U.S. Department of Homeland Security can help remodelers prepare their businesses.

NARI: The National Association of the Remodeling Industry (NARI) [3] currently has plans to create either a Webinar or podcast program on the topic of disaster preparedness/business continuity that will be added to their substantial and ever-growing collection of educational courses for members, according to Gwen Biasi, NARI Director of Marketing & Communications.

NAHB: The NAHB [4] is currently in the process of developing a Business Continuity/Disaster Recovery toolkit specifically for home-building firms. “It will cover everything from A to Z,” says Ken Ford, NAHB program manager, Mitigation and Disaster Assistance. The toolkit will be available to members of NAHB, including those belonging to the Remodelers Council.

Ford says two of the most important things to consider for business continuity are a communications plan for employees in the event of disaster and the safeguarding of all critical documents related to the business, including bank statements, tax records, contracts and accounts receivables.

“If all the records of a business were destroyed or lost, it would be very difficult for a [business] to obtain a loan for recovery from a bank or even from a governmental assistance agency if they can’t show or prove past business activity,” Ford says.

Department of Homeland Security: The Department of Homeland Security created a Web site dedicated to disaster preparedness for businesses. Ready Business contains a treasure trove of free, in-depth information; guidance; and document templates that can help any size business prepare their firms for the worst. Businesses are advised to:

• Be informed. Risk assessment is a sophisticated area of expertise that can range from self-assessment to an extensive engineering study. The size and scope of your individual company will determine your organization’s risk assessment needs.
• Know what kinds of emergencies might affect your company both internally and externally. Find out which natural disasters are most common in the areas where you operate.
• Learn what to do during a biological, chemical, explosive, nuclear or radiological attack.

The impact of downtime

A white paper, “The Business Case for Disaster Recovery Planning: Calculating the Cost of Downtime” [5] prepared by Iron Mountain [6], a firm that provides outsourced records and information management services for businesses, warns that virtually every company faces the risk of IT interruptions that can grind business to a halt. The white paper explains:

“One overlooked truth is that downtime costs accelerate. ... If a system fails for five minutes, the costs are fairly low because manual methods of making records or communicating by telephone instead of emails can suffice to conduct business. Over an extended period, however, the volume of work overwhelms the manual process. Business and financial operations increasingly deteriorate, and the rate of dollar losses grows — sometimes to the point of fatally damaging the business.”

Preparing your company to handle a disaster encompasses everything from emergency planning for employees to getting in touch with the right organizations. For more information, visit www.HousingZone.com.

A version of this article originally appeared in our sister publication Housing Giants.