Startup Diaries: When Disasters Happen to Your Small Business

[Startup Diaries is a new original series of articles from Yahoo! Small Business Advisor that chronicles the day-to-day and week-to-week struggles of a variety of startup and new small businesses.]

Amanda Kaiser and her husband purchased a struggling New Orleans coffee shop in October 2011. After nearly a year in business, Hurricane Isaac hit in August 2012, causing significant property damage that has closed the doors at Avenue Cafe.

The possibility of an unexpected disaster is usually the furthest thing from a new business owner's mind. More pressing are the problems of profit margins, growing the customer base, and simply getting started. When my husband and I purchased our coffee shop we were required by our landlord to have very specific and far-reaching insurance coverage, as a large national corporation owned the building. Another thing that our big-business landlord had was a very long lease with specific clauses detailing every possible outcome.

As new business owners we did read through it, but mainly were concerned with the terms of the rent and the length of the lease. Clauses pertaining to extended closures and natural disasters were practically an afterthought to us. Being located in the city of New Orleans, an area prone to hurricanes and flooding, we knew that there was always the possibility of something happening.

Last August marked a few firsts for us when we experienced the first hurricane to threaten our city as business owners and as parents. Going through the preparations for Hurricane Isaac as parents to two small children (a 3-year-old and an 8-month-old) were exhausting enough, but the added concerns of how our business would fare, losing sales those crucial last few days of the month, and how it would affect our employees was beyond overwhelming. The weekend before the hurricane was our busiest in months, as the summertime slump was ending and university students were moving back into the dorms. This meant that we had placed big orders for Monday to replenish our supplies, and the hurricane had no definite path to New Orleans until late Sunday evening after all the orders had already been placed.

By Wednesday the storm had pretty much passed, and the national corporation who owned the building quickly contacted us to say there was slight damage where some bricks fell, but it was not on our end of the building. On Thursday, we were beyond stir crazy having been indoors with our small kids for several days, and anxious to see firsthand how bad the damage was. Driving up to the shop, for some reason I felt we would have power and could quickly reopen. Not only was there no power in the building, but also the damage had left piles of rubble blocking the sidewalk, with people around filming it. For a small storm that had left most of New Orleans undamaged, this was the biggest, most shocking wreckage to see from Isaac. And still we were optimistic about a quick reopening date, as the landlord already had a crew out putting up a fence for repairs.

Fast-forward three months later, and the shop is still unopened and repairs are not yet complete. The business interruption insurance that claimed to have up to $30,000 monthly coverage paid out only $1,500 a month for three months, which was the total timeframe covered. That small amount of money was calculated somehow from our profit margins thus far. What those profit margins did not show was an almost 100 percent increase in sales from the last owner, since we did not have any official paperwork from their accounting, nor did it take into account we had gotten through the slow summer period and were just about to go into the booming fall tourism season with football in New Orleans. Future earnings projections from our accountant had us at a steady 20 percent monthly growth rate simply doing what we were doing, but we had other plans for added growth that would have greatly increased that. Our bills did not stop, we had monthly insurance payments, a cable contract, an advertising contract, a business loan, cell phones, and other expenses that do not cease to exist or pause. The big-business landlord kept promising a quick reopen, giving us several missed opening dates, while no work was being done and we could hardly get anyone on the phone to explain what was going on.

Being in New Orleans and watching the fragile first year of a business get more precarious by the second, it was ridiculously frustrating and upsetting to feel as if your hard work and devotion to a business was falling apart because of mismanagement by a big business with contacts in two other states who were in no way being affected by all the delays. It was eye-opening to learn we had signed something in our lease stating that if we were to sue them, they were not responsible for court fees or costs, making it impossible to even consider pursing a lawsuit. Apparently, the lease even stated that they did not have to stop charging us rent while we were closed (they did not charge us). The only people who seemed willing to have any understanding or concern for our situation were other small business owners who clearly do not have the profit margins or incomes of the big businesses that kept demanding payments.

Over three months of living in limbo, waiting to find out when a real reopening would happen, struggling financially, and mourning the months of hard work and sacrifice lost to a single storm eventually led us to the decision to sell the business as is, hoping to recoup our losses. To simply survive those three months required dipping into our meager savings, borrowing money from a family member, and taking a small business loan; it is hard to justify taking on any more financial risks.

Lessons learned: Having a big-business landlord means getting lost in the shuffle and losing time to ridiculous corporate red tape, never sign such a one-sided lease again, and get a clear understanding of what the insurance policy truly covers. That being said, many have advised me that their first businesses fail or struggled in some way -- chalk it up to a learning experience and the money lost can be considered tuition. I did not fail, I learned an incredible amount, and now am more prepared for the next go around, whenever it may be.

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