07/13/2005
CONTACT: Melissa Sharp (202) 554-9000
Disasters lead to loss of sales and customers
As Hurricane Dennis lashed the Florida coast and headed north, the flooding, building damage and washed-out roads can have a dramatic effect on small businesses according to a National Federation of Independent Business Research poll. And hurricane season is just beginning. Scientists at the National Oceanic and Atmospheric Administration (NOAA) are predicting a 70 percent chance of an above-normal hurricane season, which could be devastating to some small businesses located in hurricane-prone areas.
NFIB, the nation's largest small-business advocacy group, conducted a Small-Business Poll in late 2004 to determine what type of impact disasters had on small-business owners.
According to the poll, in the last three years, nearly one- third (30 percent) of operating small businesses in the United States have been forced to shut their doors for 24 hours or longer due to a natural disaster. While winter storms affect larger numbers of businesses overall, hurricanes, tornadoes and typhoons are significantly more destructive in the damage caused.
The random-sample survey on which the study is based was interrupted by the series of hurricanes that struck Florida beginning late last summer, likely causing an under-representation of difficulties reported. Compounding the problem is the fact that many small firms hit by natural disasters do not recover and therefore were not included in the sample.
The loss of sales and customers was cited by nearly two-thirds (66 percent) of the respondents as the biggest problem brought on by natural disasters. Eighteen percent ranked expenses/damage not covered by their insurance policy as a major difficulty. Overall however, many believed their insurance coverage was adequate. The lack of insurance coverage was more often related to continuing operations than to property damage.
Extreme impacts -- defined as those forcing a business to shut down for at least one week or causing $100,000 or more in damages -- are highly concentrated. Only 1 to 2 percent reported experiencing such an event during the past three years.
Man-made disasters, ranging from civil disorders to terrorism and arson, caused hardships for one in 10 small-business owners during the period. The most common type cited was "terrorism," but researchers were unable to determine how many responses reflect the terrorism inflicted on Sept. 11 or other forms, such as "eco-terrorism."
Calamitous computer viruses were cited by more than one-third (34 percent), 60 percent of whom were forced to pay for professional assistance to exterminate the bugs and restore their systems. The destruction was so severe for 29 percent that they had no alternative but to buy new computer equipment. More than one-fourth (34 percent) claimed virus attacks destroyed some of their documents. Many small-business owners are now taking preventative measures. More than eight of 10 use anti-virus software to protect their businesses.
Eleven percent of small employers ranked vandalism as the second-most-frequent type of man-made disaster, followed by break-in/theft (8 percent). Only 3 percent named civil disorder or demonstrations and no one cited arson.
Economic disruptions, such as highway construction, road re-routing and urban renewal projects, were experienced by 12 percent of those surveyed. Only 15 percent said they received prior notice by authorities more than 90 days ahead of the interference.
Power failures of at least 24 hours were disasters for 21 percent in the past three years. Although such outages are typically storm-related, about half of those experienced a loss of a day or longer due to causes other than weather. About 20 percent of those surveyed reported having back-up generators at their principal place of business.
Advance warning is crucial to the ability of a small business to minimize the damage of a natural disaster. However, nearly half (44 percent) said they had no advance warning and 5 percent reported receiving only one-hour's notice before the blow.
Thirty-eight percent of small-business owners have an emergency-preparedness plan on hand, almost all of whom confirmed communicating it to their employees.
The executive interviewing group of the Gallup Organization collected the data for this National Small-Business Poll for the NFIB Research Foundation. The interviews were conducted between August 6 and September 6, 2004, from a national sample of small employers. "Small employer" was defined for purposes of this survey as a business owner employing no fewer than one individual and no more than 249. The National Federation of Independent Business is the nation's largest small-business advocacy group. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its 600,000 members in Washington and all 50 state capitals.
