Is It Worth Risking Disaster for the Perfect Location?

Posted on December 7, 2011.

Author: John Grossman

We just published a case study that describes the dilemma faced by Pulling Down the Moon, a Chicago business that was hit by not one but two floods in just less than a year. Tamara Quinn and Beth Heller, co-owners of the company, a provider of supplemental holistic services like yoga, acupuncture, and massage therapy to women undergoing fertility treatments, chose to facilitate referrals by subleasing first-floor space just down the hall from one of the country's biggest fertility clinics.

But this seemingly shrewd subletting arrangement in a landmark building along the Chicago River had unintended consequences in the wake of a flood in July 2010. The flood uncovered an overlooked potential downside to sub-leasing: being beholden to your landlord's disaster response, as if riding on the rear seat of a bicycle built for two. The fertility clinic decided to take advantage of the need to rebuild by redesigning and reconfiguring its offices, including shifting its tenant's quarters. For Pulling Down the Moon, the landlord's decision meant extra months in make-do temporary space while the restoration dragged on. And it cost Ms. Quinn and Ms. Heller $60,000 because their insurance would pay only to restore existing walls, not to build new walls.

This past July, a second storm soaked Pulling Down the Moon's Chicago location, again stressing the business and its owners, who were asking themselves: Should they rebuild and stay conveniently close to so much of their business? Or should they throw in the wet towel and move to drier ground?

Below, you'll see what other business owners and insurance experts say Pulling Down the Moon should do. What do you think? Use the comment section to provide your suggestions for these beleaguered entrepreneurs. Next week, we will explain how Ms. Quinn and Ms. Heller responded to their disaster 2.0.

Ken Barnett, chief executive of MARS Advertising, a marketing agency based in Southfield, Mich., that lost everything in its 50,000-square-foot headquarters to a 2004 fire: "The karma may be great along the river, the space may be perfect, but the fact is there are enough things in business that you cannot plan for. Why burden yourself with the uncertainty, lying in bed on a stormy night, that your business may not survive."

Donna Childs, author of a book about disaster preparedness: "The answer to the question of should they move to a new location is to be found in the mission of the business, providing stress-reducing yoga to aid fertility. Disruptions are stressful."

Frank N. Darras, founding partner, DarrasLaw, an Ontario, Calif., firm specializing in insurance law: "Pulling Down the Moon enjoys 60 percent of its profit from their flagship headquarters location by being strategically located across the hall from the fertility clinic. With rent described as 'really fair market,' it's hard to imagine moving despite two floods … Unlike 77 percent of small-business owners who have never heard of business interruption insurance, purchased to recover lost profits due to loss of use or access, these smart insurance consumers had the right coverage in place."
New York Times, READ