Business Interruption: Do Your Numbers Hold Up?
When a disaster strikes, be it a fire, a catastrophic pipe burst, or a severe weather event. Most business owners look first at their physical assets. Is the roof intact? Are the machines salvageable? Is the office standing?
But at Skyscraper Insurance, we know that the physical structure is only half the story. The real threat to your legacy isn’t just the damage to the bricks and mortar; it’s the interruption of your revenue stream. Business Interruption (BI) insurance is designed to be your financial life support when your doors are forced to close. However, the most dangerous question you can ask after a loss is: “Do my coverage numbers actually hold up against today’s reality?”.
The Gap Between Assumption and Reality
Most BI policies are written based on “projections.” But projections made two years ago, or even six months ago, may no longer be valid in the economic landscape of 2026. If you are operating on outdated revenue assumptions, you aren’t just underinsured, you are exposed!
Stress-testing your revenue assumptions isn’t just a financial exercise; it’s a survival strategy.
1. Why “Yesterday’s Numbers” Fail Today
The economy moves at the speed of a skyscraper elevator, but insurance policies often move like the stairs. Inflation, shifting supply chain costs, and labor market volatility mean that the cost of doing business has changed.
If your BI coverage is based on your 2024 or 2025 revenue, you might find that the “Actual Loss Sustained” is significantly higher than your policy limits.
Key areas where assumptions often fail:
- Increased Overhead: Have your fixed costs (utilities, software subscriptions, debt service) risen while your coverage stayed the same?
- Payroll Reality: In the event of a shutdown, do you have enough “Ordinary Payroll” coverage to keep your key talent from walking across the street to a competitor?
- Margin Compression: If your revenue is up but your margins are thinner, your “Gross Earnings” calculation for insurance purposes might be dangerously inaccurate.
2. Stress-Testing Your Revenue: A 3-Step Framework
At Skyscraper, our Analytical approach involves looking at “worst-case scenarios” to ensure your business continuity plan is air-tight. We recommend every business leader perform a “stress test” on their revenue assumptions annually.
Step A: The Timeline Test
Most businesses underestimate how long it takes to get back to 100%. If your facility is destroyed, how long will it really take to clear debris, navigate 2026 zoning laws, and rebuild? If your policy has a 12-month indemnity period but the rebuild takes 18 months, who pays for those final 6 months of lost profit?
Step B: The Variable Cost Drill-Down
Not all expenses stop when your business does. We help you identify which costs are truly “variable” and which are “continuing.” Many owners realize too late that their continuing expenses are much higher than they anticipated, eating into the funds meant for profit replacement.
Step C: The Contingency Factor (CBI)
What if your business is fine, but your primary supplier in another state is wiped out? Contingent Business Interruption (CBI) is often overlooked. If your revenue depends on a single source or a specific “anchor tenant,” your stress test must include the failure of their numbers, not just yours.
3. Property & Continuity: The Skyscraper Perspective
We share your vision for a business that doesn’t just survive a crisis but thrives through it. This requires Independent Thinking. We don’t just look at what the “industry standard” is; we look at what your specific manufacturing floor or construction firm needs to stay liquid.
Our “Rate Defense” strategy isn’t just about the lowest premium; it’s about the highest value. We negotiate with carriers to ensure that you have flexible BI limits, often advocating for “Premium Adjustment” endorsements that allow your coverage to scale alongside your actual year-end revenue.
4. Continuity is More Than a Policy
Insurance is the safety net, but Business Continuity Planning is the floor you stand on. A properly stress-tested BI policy should work in tandem with:
- Remote Operations Plans: Can your professional office go virtual in 48 hours?
- Alternative Sourcing: Do you have backup vendors ready if your supply chain breaks?
- Crisis Communication: How will you tell your clients that you are “down but not out”?
When your numbers hold up, your confidence holds up. You can lead your team through a crisis because you know the financial foundation of the company is protected by an analytical, forward-thinking strategy.
Conclusion: Is Your Safety Net Wide Enough?
Disaster doesn’t wait for a convenient time, and it certainly doesn’t wait for you to update your spreadsheets. The time to stress-test your revenue assumptions is now. while the sun is shining and the business is growing.
Don’t let a gap in your Business Interruption coverage be the reason your vision for the future gets cut short. Ensure what matters most is properly protected with a team that views risk management as an art as much as a science.
Is it time to revisit your numbers? Contact the team at Skyscraper Insurance today for a no pressure, analytical review of your Business Interruption and Continuity plans. Let’s make sure your foundation is as strong as your ambitions!
