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Mar 27
2013
Steve Marr

Hurricane Sandy Devastates Small Business

Posted by: Steve Marr

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The story line is familiar.  A hurricane strikes.  An earthquake destroys buildings.  A tornado wipes out part of a town. Emergency responders rush in with aid. TV crews show us the damage and destruction. Early responders fill a need. When they leave, the long term issues for business owners begin.

When emergency and relief people rush in, many small businesses experience an increase in sales. Relief and construction workers buy gas, food, and supplies while on the job. Businesses may believe they are experiencing the start of a solid recovery.

Most small businesses, especially those with retail locations, get the majority of their business within a two mile radius.  I have asked several businesses to survey actual customers by location to determine how far they travel. The result confirmed that the two mile distance is a key factor.  As the distance increases to three to five miles, customer concentration drops much faster.

A common pattern emerges after events like Katrina, Joplin, Rita and now Sandy.  A significant number of the population is displaced long term or permanently.  These displaced people are no longer customers of the same businesses.

The U.S. Chamber of Commerce Foundation Business Leadership Center estimated that as many as 30% of small businesses will fail in the wake of Hurricane Sandy. 

Businesses are often impacted positively and negatively by population shifts. Most of these changes happen over time, a few years, or even decades. When you see devastated neighborhoods in cities, they didn’t get that way in a week. Another location may be growing; new building may be a draw; or a city neighborhood may be improving.  Folks move in, fix up homes, and others follow. I advise clients to be mindful of these trends. The Lord told Paul, “'Saul! Saul! Why are you persecuting me? It is hurting you to keep on kicking against the cattle prods.” (Acts 26:14, ISV) It is also hard for us to buck major trends.

An owner of a breakfast and lunch restaurant wanted help because business was declining. I pointed out that a large employer had relocated from the neighborhood causing a significant decline in customers. I explained that the restaurant was dependent on developing local trade.  When 40% of the customer base moved, he was in trouble. Given that the recently vacated office space was unlikely to be rented, I advised that he consider moving. He would probably fail if he remained. The key issue for him was not marketing or quality, but losing his customer base.

Some changes may allow a business owner to adapt. Some neighborhoods experience a change based on ethnic demographics as well as higher or lower income levels. As the local customer base changes, a business can adapt successfully. The key is to understand it and embrace the change.   

 A disaster may cause a population shift to happen quickly rather than over time. However, the result is the same. When businesses are dependent on local trade, they must understand how neighborhoods are changing and act.

If your business is in the center of a disaster area, before rebuilding with insurance money; think through the long term implications.  Make sure you know whether the population is shifting away or not. Don’t plan on business as usual if the facts demonstrate a different trend.


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