WILDFIRES RAGING IN CALIFORNIA are a reminder that disaster planning is critical.

A quarter of all businesses never reopen after a disaster strikes, and those that do struggle to stay afloat, according to the Institute for Business & Home Safety, a Tampa, Fla., nonprofit sponsored by insurers.

Small businesses are particularly vulnerable because they usually have limited financial resources to tap in times of disaster. Plus, they tend to rely on a local customer base, which might not be present once the proverbial floodwaters recede. And small businesses are more likely to suffer prolonged damages than larger businesses because they neglect to install comprehensive recovery plans or even lack the know-how to assess risks in the first place.

To limit the fall-out if the unthinkable does happen, your best bet is to have an actionable contingency plan on hand. This document is essentially a written account of how your business will proceed in the event of a disaster or an unforeseen hiccup. (To read more about contingency plans click here). But even for those that have one, there are many ways to physically protect your business property.

Here are a few precautionary measures to consider:

Assess and Combat Risks

Your first step is to assess the types of dangers that may befall your business. For example, if you are in the middle of a wildfire area, says Harvey G. Ryland, president and chief executive of IBHS, make sure you don't have a combustible roof and that the plants located around your building don't help fan the flames of threatening fires. For a list of fire resistant plants that might flourish instead, visit the web site of Firewise Communities, a Quincy, Mass., program funded by the National Fire Protection Association and other agencies.

If your company occupies an older building, consider installing a sprinkler system, suggests Gregg Wind, an accountant in Los Angeles who advises small businesses on disaster preparedness. If you are renting, he says, "perhaps the landlord will be willing to share the cost with you."

Be aware that some disasters — such as floods, which can occur just about anywhere — are difficult to predict. "Give yourself an extra margin of safety," says Jim Schwab, manager of the American Planning Association's Hazards Planning Research Center in Chicago. He suggests taking some extra precautions such as flood-proofing the basement. For example, you might consider elevating the building, or at least make sure your business's expensive computer equipment isn't housed in the basement.

These protectionary measures aren't cheap. To install a fire-resistant wooden roof, a business that occupies, say, a 5,000-square-foot building can expect to pay about $15,000, or 30% on top of the cost of the wood, according to Chemco, a Ferndale, Wash., supplier of fire-retardant wooden shingles.

But even if protective measures are costly, "if you aren't prepared it will cost you much more," says Terry Eyberg, senior manager of personal-financial services at Ernst & Young in New York. "You're buying peace of mind."

Ins and Outs of Insurance

When disaster strikes, more than just the physical structure of your business is at stake. There's also the potential loss of revenues, clients and customers. That's why insurance might be your best option.

Review your business owner's policy, or BOP, suggests Wind, the Los Angeles-based accountant. "If the property value went up, your insurance [policy] might not cover the full cost of the damages to your building," he says. "It's a good idea to have the business appraised periodically" — that is, every three to four years.

The same goes for people with home-based businesses. "Most people who have home-based small businesses think their homeowner's policy will cover any damages to their business's equipment," says Eyberg. Instead, she says, many times people need to add a rider to their current policies or tack on a BOP.

But no matter what, "business-interruption insurance is critical," Eyberg says. This type of insurance can cover loss of profits after a disaster, as well as operation expenses and temporary work-space costs. If you don't have business-interruption insurance and you've just gone through a serious business-closing disaster, "you will have nothing to protect you from lost income," she adds.

To get your insurance payments quicker after a disaster occurs, "you'll want to have backed up records and sensitive financial information," says Steven D. Hernandez, world-wide loss-control manager for Chubb Commercial Insurance in Whitehouse Station, N.J. "In order to ensure long-term stability of your property," says Hernandez, "store sensitive data in a fire-safe location away from your business."

Taxing Issues

When your policy pays out, according to the Internal Revenue Service's Publication 547, a business owner has a three-year window to reinvest proceeds in similar property or equipment. Otherwise, "it would be an income tax to the business," says Wind. However, if you need more time, he added, you can appeal to the IRS for an extension.

Depending on the circumstances, the IRS may grant additional time to file returns and pay taxes. If the president declares an area to be a disaster (see the White House's statement on California here), both individuals and businesses can get a faster refund by claiming losses related to the disaster on the tax return for the previous year. This, according to the IRS, usually happens by filing an amended return.