Do you look both ways?
As a child, someone taught you the importance of looking both ways before you could safely cross the road. You had to know the risks, to safely make it to the other side.
The same thinking holds for starting a business. Knowing what to look for, and when means the difference between life and death for your company. Every year, almost 80% of new companies die off, simply because they weren’t prepared.
If you aren’t aware of the business risks, you’ll be like the child that doesn’t look both ways. You might luck out and safely cross the road a few times. Yet, one day, a car is going to hit you.
While a child might have someone there to teach them and hold their hands, it’s not so easy for you. Instead, it’s up to you to educate yourself about every potential risk, challenge, and obstacle, you might have to battle with.
Do you want your company to have the chance to grow up and live a long and healthy life? Read on to learn about 3 major risks all new businesses should prepare for.
1. Business Interruption Risks
Natural disasters, major incidents, and building issues can all wreak havoc on your business. It can even be something as unexpected as a car accident, that causes you to have to close down the shop.
Sadly, this was the case for Dr. Martinez, a dentist working in Central, Florida. On an otherwise normal Tuesday evening, a driver lost control of their Mustang, driving it directly into his office building.
The driver was okay, and luckily there wasn’t anyone inside the building at the time. Yet, while nobody got hurt, the dentist’s office building did suffer a long list of damages.
The Mustang left a gigantic hole in the side of the building, leaving extensive damage on both the inside and outside. Dr. Martinez wasn’t able to continue with his practice until the building was fully repaired.
How to Prepare for Business Interruptions
If you don’t already have it, go ahead and purchase business interruption insurance. This type of insurance is usually a standard part of a regular business owner’s insurance policy. Yet, you shouldn’t assume that your policy will contain this coverage.
Instead, schedule a time to speak to your commercial insurance agent. Ask that your agent review your policy with you, explaining all of the different coverages. Make sure you have them show you where in your policy it states that you have coverage for business interruption.
Read the Fine Print
Next, you’ll need to go over the fine details of the type of insurance you have. Simply, having business interruption coverage isn’t enough.
You need to verify exactly how the coverage will protect you in the event of a major interruption. Someone running a store with a physical address will need more coverage than someone who only operates virtually. On top of making sure you get the right coverage, make sure your agent understands your industry.
For example, someone in the cannabis industry should see this page. While an individual working in the food industry would do better with an insurance agent who specializes in the food industry. Whatever industry your business falls in, take the time to do an internet search for insurance companies that are experts in your field.
2. Professional Liability Risks
When you start a business, you’re held to a higher level of accountability. Especially if your business involves providing any type of advice or service to your clients.
Here’s a list of the professions that are most likely to encounter an issue with professional liability:
- General contractor
- Financial services
- Land surveying
- Certain non-profits
Does your company give guidance to its customers about important aspects of their lives? If so, you need to look into purchasing “errors and omissions insurance”.
How to Prepare for Professional Liability Risks
Having the right insurance policy means that when a client holds you responsible, you’ll have a backup. These insurance plans can help cover legal fees, and any costs of settlements decided against you.
Liability in the Legal Profession
If your company provides legal services, someone can sue you for legal malpractice. The worst part about a legal malpractice lawsuit is the negative publicity it can cause for your law firm.
One of the coverages you’ll need to seek out is coverage for “professional services”. This will help cover any employee who gives legal advice while working for your firm.
3. Competitive Business Risks
Your company is like a sports team. If you want to make it to the championships, you’ll have to learn how to beat out your competition. Fail to do so and the rival team will be claiming your trophy, or in this case, your customers.
Any level of competition that can stop your business from growing is a competitive risk. Even great brands will falter if they fail to recognize their competitive threats.
Yet, many companies do just that. They ignore the competition and focus all of their energy on creating a great customer experience. While, the customer experience is vital for your success, ignoring the competition is a recipe for disaster.
How to Prepare for Competitive Risks
To prepare for competitive risks, you’ll need to evaluate all threats appropriately. Only when you know what you’re up against can you create an efficient plan of attack.
For example, let’s say you’re up against a major competitor in the market. Launching a new product could be the best way for you to increase revenue, while also acquiring new customers. Whereas if you’re only up against a minor market threat, you might choose a less expensive solution plan.
Win By Planning Ahead
Now you know more about 3 common business risks you could end up facing. Yet, instead of stressing or worrying about them, you know exactly how you can prepare.
Knowing who your competition is and having the right insurance coverage is a great place to start. However, that doesn’t mean you can’t stop there.
To succeed as a business owner, you have to always be adding new information to your knowledge base. It’s your job to always be growing both as a business and as an individual.
After all, if you’re not challenging yourself to grow, you’re probably sticking inside your comfort zone. While that may be enjoyable for a while, you’ll never reach your goals doing the things you already know how to do.
Break out of your comfort zone today and learn about something else that’s new to you. Check out our other business articles, today!