What Would You Do in a Disaster?

August 04, 2017

Planning for possible disruptions to the business is one of your most important responsibilities as a dealership owner. This includes disruptions caused by disasters such as hurricanes, earthquakes, cybercrime, terrorist attacks and server crashes, to name a few.

The best way to plan for potential disasters is to create a disaster recovery and business continuity plan. This plan will detail exactly how your dealership would respond in the aftermath of any kind of natural or man-made disaster.

Primary planning objectives

A disaster recovery and business continuity plan should enable you to accomplish two main objectives. The first is to get your most critical infrastructure and operations back up and running so you can reopen and start selling cars again quickly. For dealerships, this usually includes:

• Reopening the physical store itself,

• Restocking vehicle and parts and service inventory that has been destroyed or damaged,

• Recovering critical customer and internal data and records that have been lost, and

• Repairing or replacing broken computers, networking and telecommunications equipment.

The second main objective is to ensure the long-term survival and success of your dealership in the weeks and months after a disaster happens. This is especially critical given the fact that 40% of businesses fail to reopen after a disaster, according to Gartner, a research and advisory company. The goal shouldn’t only be resuming predisaster levels of vehicle sales and service, but also making sure these levels will be maintained for the long term.

Your disaster planning team

Start by forming a disaster planning team that will be responsible for creating, reviewing and modifying (as necessary) your disaster recovery and business continuity plan. A high-level executive should lead the team, which should include representatives from each area of your dealership. This typically includes new and used vehicle sales, parts and service, F&I, accounting and finance, and information technology.

Following are some of the key steps usually involved in disaster recovery and business continuity planning for dealerships:

Safeguard and back up all critical data. Ideally, data such as vehicle sales and service records and customer billing and contact information should be backed up offsite or in the cloud. This is the best way to ensure that critical data isn’t permanently lost if your servers and computers are damaged or destroyed.

Ensure uninterrupted financial operations. For example, have your bank set aside funds for one payroll period, and establish a procedure for authorizing direct deposit of these funds to employees’ bank accounts. This way, employees can still get paid even if your dealership is closed for a period of time after the disaster.

Arrange for an alternate power source. Have backup generators installed at your dealership that are ready to go after a disaster, or make contingency plans for the rental of generators. Also look into the rental of mobile trailers, which can serve as temporary facilities while your dealership is being repaired or rebuilt.

Plan for postdisaster communications with employees. Gather emergency contact information such as cell phone numbers and email addresses for all your employees and store this in an easily accessible location. This will enable you to keep employees informed about reopening dates and when they should return to work.

Determine how you will protect vehicles on your lot and obtain replacement inventory. It’s not uncommon for looters and thieves to damage and steal vehicles after disasters, so plan for how you will secure keys and safeguard your cars and trucks. Also talk to manufacturers and your floor-plan financier about the process for replacing damaged vehicle inventory.

Begin planning now

Disasters tend to happen when businesses least expect them. Don’t be caught unprepared: Take steps now to create a disaster recovery and business continuity plan so you’ll be ready if disaster strikes.

The role of insurance in a disaster

Your business casualty insurance will likely help cover the cost of replacing tangible items such as your facilities, inventory and computer equipment that are damaged or destroyed in a disaster. But you can obtain additional coverage by purchasing business interruption insurance.

This type of insurance also will provide coverage for such things as payroll, your mortgage and utilities, and even lost profits during the time you’re closed after a disaster. Talk to an insurance professional about whether buying business interruption insurance makes sense for your dealership and how much coverage is appropriate.

© 2017