Scout Motto Still Applies: Be Prepared

“Before anything else, preparation is the key to success.”

Alexander Graham Bell

I watched a sad video today of some of the devastation wrought by Hurricane Sandy in Sea Bright, New Jersey. Block after block of small businesses were totally wiped out. Of those not yet boarded up, all that was visible was a huge, gaping, black interior.

Many of them may rebuild. But a lot won’t. “Small businesses that don’t have a plan in place generally don’t survive after a disaster, whether it’s a flood or a tornado. We see that anywhere from 40-60 percent of those that are hit like that simply don’t come back to business,” said David Paulison, former executive director of the FEMA, in an interview in 2009.

A street in Sea Bright, New Jersey showing the affects of Hurricane Sandy

Truth is, there may not be much you can do to prepare your business if you live by the ocean and are in the direct path of a massive “Frankenstorm.”

You can gather up as much inventory as you can, then ensure that you and your loved ones are in a safe place and hope for the best.

While most business owners won’t ever have to worry about the effects of a massive hurricane, other disasters — natural and manmade — can affect a business anywhere.

I’m currently serving as the court-appointed receiver for a historic hotel. The current owners bought it in 2008 and planned to spend $10 million renovating it, but after they shelled out $7.5 million, water pipes burst and damaged several floors of the property. The owners shuttered the property and tried to liquidate their debts on the hotel through bankruptcy. No go.

So a judge appointed me as receiver to sell the hotel and use the proceeds to pay down the bond debt.

The hotel had been shut down for two years, with no heat or air conditioning. Can you imagine how it looked? And smelled? Let’s just say this is a job bigger than Febreze.

That’s why I say my job is like being a janitor. I’m called in to clean up other people’s messes. This one is going to take more than a mop, a bucket and some disinfectant spray.

The lesson is that you have to be prepared. Better to have a plan and never need it. Remember all those Y2K preparations? My basement was full of drinking water for years. But I never regretted being prepared in the event those dire warnings had come true.

While very large companies often have emergency programs often small and medium-sized companies do not.

If you don’t have a plan, it’s time to make one. Some of the basics to consider when making your plan include:

Investing in disaster insurance. You can get policies that cover the structure of your building, loss of inventory items and even interruption insurance that reimburses you if your company can’t conduct business. (Note that many business insurance policies exclude food and earthquake damage so you may wish to purchase additional coverage if those are areas of concern.)

Backing up your computers with off-site storage. You hear a lot these days about “the cloud.” That’s just a fancy name for a remote server. I know one guy who set up a cloud in his basement so all his computers are backed up away from his office. He also has a generator to keep everything humming.

Setting up plans to conduct business at another location. There are companies that back up all the information needed to run your business and provide the temporary facilities to perform the task.  If disaster strikes, you can show up there the next day and be open for business.

Creation of a list of emergency phone numbers and addresses and contact information for staff, business contacts and major clients. Sure, you have all that information. Somewhere. Make sure you can find all that information fast if you need it.

There’s plenty of information available on how you can prepare your disaster program.

• For small businesses, visit the Small Business Association at PrepareMyBusiness.org.

• For larger businesses, visit Ready.gov/Business

• Visit this IRS site for information on how to safeguard your essential records

• FEMA has additional information for businesses at www.fema.gov/protecting-your-businesses

Just remember the Scout motto: Be prepared.

I’ll close with another of my favorite quotes on the topic by Winston Churchill: “I’m just preparing my impromptu remarks.”

I Want to Introduce You to a New Friend

What do you think of when I say, “The IRS?”

Does your stomach clench up a bit? Does your forehead get warm? Maybe the physiological reaction isn’t so dramatic, but I imagine that your mental associations with the Internal Revenue Service of the United States are anything but positive. Fair to say?

Maybe you got off to a rough start, but perhaps that was due more to schoolyard rumors than anything else. It’s possible, too, that you’ve hit a rough spot in your relationship. But I want you to get reacquainted with the IRS and think about the way you two could be friends.

Certainly the thoughts of being friends with someone taking anywhere from 25% to 50% of your hard-earned dough on an annual basis might seem distasteful. I don’t like the Tax Man any more than the next guy, but as long as you accept that the IRS is taking some of your money every year – and you really come to terms with the fact – you may want to get better acquainted.

There are only two business people who should be concerned by the IRS:

1. Those whose accounting is so terrible that an audit would be an unbearable nightmare, and

2. Those who are trying to cheat and break the law.

If you don’t fall into either of those categories (and a lot of my clients, I unfortunately discover, do), then consider what the IRS can do for you. Remember, the government is going to take a nice bite out of your income, but the size of the bite and the ferocity with which it’s taken might be more variable than you’d otherwise imagined, particularly if you are a business owner, CEO, president or CFO.

And I want to be very clear here that everything I am suggesting you do is 100% legal. Do NOT do anything illegal. It’s not worth it, and you will be caught. They’re always caught. Trust me. I’ve seen more fraud than you can imagine.

You might be saying right now, of course there are ways of paying taxes “better” – that’s why I have a CPA. And I bet you have a wonderful CPA, but I assure you he won’t mind you doing a little leg work yourself to figure out how to save your company some money.

An obvious way to save money is to take advantage of the Bonus Depreciation and Increased Section 179 Deduction under the American Recovery and Reinvestment Act, which allows you to fully depreciate a wide variety of assets. That’s right. No schedules this year if you don’t want them. And the IRS is happy to let you do it.

That’s just the tip of the iceberg, though, and the only way you’re going to figure out all of the ways that you could more advantageously be classifying your expenses and spending your money is if you explore www.IRS.gov. Use the search bar in the top right hand corner and start getting acquainted with the IRS. You guys could be better friends than you think.

WARNING: Obviously you shouldn’t go reorganizing your business’s books for 2011, confusing your CPA/account/bookkeeper and doing anything funny. However, since you’re bound to be meeting with your accountant again soon, you should think about all the ways you spend money – consider terms like “petty cash,” “entertainment” and “meals” for starters – and start looking them up. Go to your accountant with a list of questions, suggestions and links, and see if s/he can’t continue steering you in great directions to get, use and save more money in 2012 than you may have in 2011.

If you notice any particularly good tidbits while you’re looking around, share them with us in the comments section below. Happy hunting!