What percentage of businesses fail following a disaster?

On the search for some hard statistics on business failures following a disaster.

There are a number of statistics floating around which are often quoted in articles but never attributed. One of them is the percentage of businesses that fail in the months  following a disaster.

The range for this mythical figure is quite high. I’ve seen 70% quoted quite often. Sometimes the number is 80%. Other times it is a more plausible 40%.

I’ve searched for a reliable source for this number. Was it a survey of businesses following 9/11? The Manchester bombing? Hurricane Andrew? I think now that I have finally found the answer to this question.

So what is the percentage of businesses that fail following a disaster?

The answer is simply this: it does not matter.

Suppose you had access to the data to compute this statistic, what would it actually tell you? There were 18,000 small businesses “… dislocated, disrupted, or destroyed” by 9/11 according to a congressional report. But how many of those were hot dog vendors? Retail shops with a single outlet? Manufacturers of candles? Bicycle couriers? Financial service companies?

Comparing ourselves to this magic percentage does not help us at all with the question we really need to answer: how likely are we to go out of business following a disaster?

The statistics for an arbitrary group of companies is only of interest to editorial writers and politicians. For the rest of us, what matters is only how different types of disaster will affect us – something that we can only determine through a thorough examination of our own business.

 

 

26 September 2012

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