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There's a New Threat to Small Business: Water Scarcity

Operate a business in a drought zone? Unfortunately, the lack of water you face is out of your control. Here are some considerations.
There's a New Threat to Small Business: Water Scarcity
Image credit: Justin Sullivan | Getty Images

In rain-starved places like California, Nevada and Texas, water shortages and rate hikes are becoming common. Even areas that receive rainfall face shortages. Why?

Related: Starbucks Seeking New Sources for Water Bottled in Drought-Stricken California

Recycling, conservation, innovation, the search for water sources and the need to change people's behaviors are urgent priorities. But the scope of the problem has gone beyond what many governments and private operators can fix, especially considering the enormous demand for our planet's most precious resource, and its limited availability.

In drought-afflicted California, residents and commercial users must ration out 20 percent of what's left after agriculture takes its whopping 80 percent cut of the state's water. (An acre of almonds in the Golden State, for example, needs 326,000 gallons of water.)

Thus, small businesses located in arid regions face the risk of getting squeezed out of a natural resource most Americans take for granted. As a result, in California and Texas, establishments near affected marinas, rivers and lakes are closing up shop because there's nothing to see and do in places where record-low water levels are producing barren wasteland.

Visitors arrive to find vistas of cracked dirt, dry grass and dusty wind; then they quickly leave without buying souvenirs or food.

"The drought here in California has spiked my water bill," says Ben Paler, a co-owner of car-wash outlets near San Jose. "But the state has also imposed mandatory curbs on water use, and that's making it tough to run my business. You'd think you're guaranteed access to basic resources; but on some days we don't [have them]."

If you're an entrepreneur in a drought zone, here are some key considerations.

1. Does your business need to adapt to bone-dry weather?

If it does, your venture may get blindsided by unforeseen operational and financial risks. Car washes, laundry mats, restaurants and even golf courses should stay abreast of regulatory proposals in your municipality or state. Keep an eye out for the proposed rationing of water use, mandatory price hikes aimed at curbing demand and other restrictions.

The Small Business Administration (SBA) recommends that businesses adopt practices that conserve water, such as repairing leaky pipes, installing water-efficient appliances, maintaining efficient landscaping and improving employee awareness. It might be worth their time to research emerging processes and technologies that enable their industry to do more with less (water).

Related: This Barber-Turned-Entrepreneur Is Cashing In on the California Drought by Painting Dead Grass Green

2. Are there other conditions that could affect your operations?

Are local authorities or private providers resorting to rate hikes in order to curb demand? That may signal that they aren't able to supply enough water. So, if you own a water-intensive operation, consider how such measures, and potential lack of access to H2o in the future, could affect your business. How can you mitigate your risks, and how would a higher cost structure or lack of access affect your bottom line?

3. Are you dealing with crumbling infrasture?

Crumbling infrastructure is creating problems for residential and commercial users. For example, breaks in water mains are on the rise, and those lead to contaminated water. More than half of boil water notices (BWN) stem from damaged water mains, which tend to peak during the summer months. "BWNs are common," says Robert Prentice, director of product development for Florida-based Pelican Water Systems. "Any time a water main breaks or the city losses pressure on the [water] lines, everyone in the affected area goes on that alert. That includes businesses and homes."

The state of Kentucky alone issues nearly 2,500 BWNs each year, and nearly 7,000 are issued annually across the country. "The number of water main breaks across the country … is 240,000 per year, and the direct cost of these leaks is pegged at $2.6 billion per year," according to Deloitte. "The American Society of Civil Engineers estimates that, while the cumulative cost to households from degrading water/wastewater infrastructure will add up to $59 billion (in 2010 dollars) over the period between 2013 and 2020, the cost to business will be more than double that, at $147 billion."

If you're looking to expand your business in other locations, find out if your area has frequent water issues. "Much of our drinking water infrastructure -- the more than one million miles of pipes beneath our streets -- is nearing the end of its useful life and approaching the age at which it needs to be replaced," reports the American Water Works Association.

More than $1 trillion needs to be spent over the next 25 years on America's aging water infrastructure to maintain current levels of water service, the association estimates.

The takeaway

America's small businesses need to overhaul their water practices and infrastructure. Certain businesses are exposed to water-related risks -- establishments such as the neighborhood laundry mat, car wash, golf course cleaning-services providers and restaurants.

Reservoirs, aquifers and wells are being tapped faster than what precipitation can naturally replenish. "By 2030, water supplies will satisfy only 60 percent of global demand . . . and less than 50 percent in many developing regions where water supply is already under stress," McKinsey reports. Not surprisingly, water prices are up by 41 percent in 30 major U.S. cities since 2010, according to Circle of Blue, a water think tank.

Related: How Agritech Startups Can Help Farmers Grappling With Drought

In sum, when it comes to water, businesses need to "do more with less" -- and start planning how to do that now.