Certain states are more prone to specific disasters than others. In Florida, we have to worry about hurricanes. In California, it’s earthquakes. But your auto dealership does not have to be located in either of these states to worry about disaster preparedness.

Just about every state in the union faces the possibilities of some kind of natural disaster. In Florida and all other states along the East Coast, the main risks to your dealership are hurricanes and tropical storms. The official Atlantic Hurricane has already started. It runs from June 1 to November 30. And by all accounts, we are now expecting a “somewhat higher than normal” Atlantic Hurricane Season.

Even if your dealership is not threatened by Hurricane Season, emergency preparedness can be the key to your dealership “weathering the storm.” So it is never too late, nor too soon to prepare for natural disasters.

Preparedness for Personal Safety

As part of your preparedness for the safety and security of staff and customers, it is always a good idea to assign a “captain” or “emergency coordinator” to take the lead during any disaster. Check among your staff if you have any employees with military, first-aid, or other specialized training that would make them ideally suited for this task.

Have your captain or emergency coordinator check all public safety gear and equipment, including firefighting equipment and first aid materials. Repair and replace faulty items as necessary. In addition to fire safety equipment and first aid kits, you may want to budget for Automatic External Defibrillators (AEDs), and other “shelter-in-place” supplies that may be needed. Make sure all employees know how to access and use these supplies.

Make sure you have an evacuation plan in place so you are prepared should an emergency occur during business hours. Make certain that considerations have been made for employees and/or customers with medical conditions, disabilities, or other special needs.

Dealerships also should have an employee communications plan. This plan starts with each employee having a list of all employee addresses, home phone, and mobile phone numbers. A call system should be established, with department heads and other “captains” calling designated employees to find out if their homes suffered damage and if they need any assistance.

In addition to having a plan in place for employee communications, you need to know who to contact in an emergency, and how they can help. Be sure you have contact information for:

  • Local and state police
  • Fire department and emergency medical services
  • Local government officials, emergency management office
  • Local public health agency
  • Local American Red Cross chapter
  • National Weather Service
  • Utility companies
  • Neighboring businesses
  • Preparedness for Structural Damage

If your dealership is in an area that should come under a hurricane watch or warning, cover all glass windows and doors with shutters, paneling or other protective material, such as plywood or Masonite. Use large plastic bags to protect items such as computers from water damage.

It is advisable to have a supply of heavy sheeting, air conditioning duct tape and some sandbags set aside for securing first-floor doorways against flood water. Just make sure to take before and after pictures of the business or plant to aid in insurance or tax credit claims after the storm.

Additionally, check drains on the roof of the building to ensure they are clear and able to drain off the heavy rain that usually accompanies a hurricane. Clogged roof drains could cause the roof to collapse from the weight of accumulated water, or cause damage to the interior of the building if water on the roof becomes deep enough to cover vent pipes and run down inside the building.

Physical preparations should include having enough generators — and the necessary gas — to operate the office and other facilities if electricity is off after a storm or other disaster. If you have a built-in generator for backup power, test it under load to make sure it is operating properly.

If you should need to close your dealership and secure and lock it down in preparation for an impending storm, be sure to advise local law enforcement if the business will be empty of people or if security guards will be on site. If guards are to remain on site, their safety should be provided for.

Also shut down all incoming power, electric, gas and water lines. Before restoring service, check all utilities. If there is a question about the condition of the utilities, call the appropriate company. Lastly, disconnect all electrical appliances and equipment such as computers, copiers, coffee makers, electric clocks, calculators, etc. so they do not create excessive surge when electric power is restored.

Business Continuity and Easing Recovery

Just as important as preparing for a disaster is having a plan for recovery in its aftermath. So check your policies before their annual renewal dates to make sure that coverage has kept pace with exposure. That review should be extensive for property and casualty policies and for business interruption insurance.

Business interruption insurance is critical. This type of insurance, often called “business income insurance,” provides money to a policyholder for a pre-designated period to replace lost revenue and cover payroll when a business needs to be shut down due to disaster. Dealerships should study their business interruption policies to be certain of what damages are covered. Some events you think are covered under a standard business interruption policy, such as flooding, wind damage, and/or earthquake damage, may not be, and you may need to speak to your agent to obtain separate policies for specific damage your dealership may be prone to.

Daily electronic backups of important documents, files and databases are also crucial to your recovery after a storm or other disaster. Dealerships should make copies of those records and store them in an offsite, physically secure facility. Articles of incorporation, accounts receivable, client records and important personnel and administrative documents should be among the priorities for back-up.

Other key business continuity preparation issues include:

  • Credit: Because insurance payments can be delayed, it is important to maintain a sufficient line of credit for business continuation.
  • Tax Issues: Depending on the magnitude of the disaster, federal aid may be available in the form of tax breaks at the end of the year. Thus, it is critical to stay up-to-date on tax policy changes.

The Recovery Process

After a hurricane or other disaster, recovery for a dealership involves rebuilding the physical structures and rebuilding the financial structure. But remember, in the wake of a disaster, the main goal should be to restore customer confidence by getting the doors to your showroom back open as soon as possible, which means a partial reopening may be better than remaining closed.

Here are some specifics from the Florida Automobile Dealers Association that can help your dealership get back up and running more easily after the storm:

  • Locate a source for mobile trailers in the event that your showroom is demolished. These trailers will serve as headquarters for cleanup and will be useful in the event that your sales operations will need to continue from these temporary quarters.
  • Ensure that you have a contractor available who can also help you dry out your facilities. Contractors with drying equipment and dehumidifiers are extremely helpful.
  • Talk to the people that handle your trash dumpsters and be sure that you can get additional dumpster facilities for clean up after the storm.
  • Contact area firms for bobcat and front-end loaders for debris removal.
  • Have a team of handy/strong employees who can help your employees at their homes if necessary.
  • Develop a plan for your replacement inventory. Several dealers noted that it was important to remove their damaged vehicles before any new inventory can be brought in. It is important to have a plan because there will likely be a delay. And when you decide to return to sales, you may have insufficient inventory available.

Most dealerships have tremendous problems locating skilled labor to help with damaged roofs and other structural work. For those with steel buildings, the need to contact contractors in advance is even more important as these supplies may or may not be available after a major storm.

Cash flow and traditional forms of credit may be interrupted in the aftermath of a hurricane or other major disaster. Your dealership may qualify for federal grants or low-cost disaster recovery loans.

A disaster preparedness plan for your business is one of those things that you have but hope you never use. Proper disaster planning can go a long way to giving you the peace of mind that comes with knowing that your business is ready, willing, and able to shift into disaster response mode, whenever it may be necessary.

Ira Silver, CPA/ABV/CFF/CVA/CGMA, and Mark R. Thaw, CPA/CGMA, are principals in the tax and accounting department at MBAF. They can be reached at [email protected] or [email protected].