Predicting small business demise after a natural disaster: an analysis of pre-existing conditions

Few studies of small businesses have addressed demise in post-disaster environments, and the factors that lead to business demise after natural disasters are not well understood. This study explored demise by interviewing a random sample of small business owners whose businesses survived or met demise following Hurricane Katrina. The goal of this study was to determine whether businesses that met demise could be predicted based on pre-existing characteristics of those businesses and their owners. Findings indicated that businesses owned by women, minorities, and veterans were more likely to meet demise. Owners with more industry experience and older businesses were less likely to meet demise, along with larger businesses (number of employees) and service-based businesses. Businesses that had prior disaster experience and prior cash flow problems were also less likely to meet demise post-Katrina, suggesting that prior experiences with some type of adversity may provide knowledge and insight that aid small business owners during subsequent experiences during disaster preparation, response, and recovery periods. Home-based businesses were also less likely to meet demise, whereas businesses located in coastal counties were more likely to meet demise.