In Case of Emergency

A smoke alarm or a life preserver may save your life, but they won't save your business. You need a real disaster plan now. Your business's survival depends on it.

Lonnie Lehrer thought he was prepared for anything. The CEO of Leros Point to Point, a New York City limousine service, had redundant computer systems for his dispatch software, battery backup for each computer, off-site copies of his customer data, even a spare generator. If New York were nailed by a bad winter storm or another big blackout, Leros would still be in business.

Then the first plane hit the World Trade Center on September 11, 2001, and all Lehrer's plans went down with it.

"Ninety percent of our business is tied to the airports," says Lehrer, 55. "We went from being a $7 million company to a $700,000 company overnight."

Lehrer knew if he didn't move fast, he'd be out of business in a week. Within two days, he'd slashed his own salary by 50 percent, negotiated a moratorium on loan payments with Ford Motor Co., and told his drivers they'd be facing a few lean months of partial salaries until business picked up. He also had to drop drivers who were independent contractors, lay off two staffers and reassign others temporarily.

But Lehrer's quick reaction paid off. Business slowly returned and is now better than ever: Leros recently acquired two smaller companies and expanded operations, bringing annual revenues to nearly $9 million in 2002.

Another reason for Leros' rebound: "Some of our competition disappeared after 9/11," Lehrer says. "The ones who were already on shaky ground just faded away."

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The fact that Leros had any disaster plan at all puts it ahead of most companies. According to an August 2002 study by the American Management Association, more than half the corporations surveyed had no crisis-management plans in place. And the smaller the business, the less likely it is to be prepared. Analyst firm Gartner Inc. reports that less than 10 percent of small and midsized businesses have plans in place to manage crises and ensure business continuity, and that 40 percent of companies hit by a disaster will go belly up within five years.

"Small companies often spend more time planning their company picnics than for an event that could put them out of business," explains Katherine Heaviside, principal of Epoch 5, a Huntington, New York, public relations firm that specializes in crisis communications.

The reason? Many entrepreneurs believe that preparing for disaster is too expensive or time-consuming. But that's not necessarily true, say crisis-management experts. The most important steps for surviving a crisis cost little or nothing. Being unprepared, however, can be the costliest strategy of all.

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This article was originally published in the April 2003 print edition of Entrepreneur with the headline: In Case of Emergency.

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