Each year presents new challenges and opportunities for your company. But one constant from year to year is that you face business risks. Recent events have made business owners more aware of this than ever. From the pandemic to economic uncertainty to social and political unrest in the U.S. and worldwide, there are many forces and factors that can and will affect businesses in the coming months.
That’s why financial protection in its various forms (small business insurance, for example) is critical. And your protective measures aren’t something you can implement (perhaps years ago) and forget. You must review them regularly and update them as needed.
The first quarter of a new year is an excellent time to assess what’s changed for your business (your products and services, employee count, assets, market drivers, etc.) and determine whether those changes necessitate modifications to how you protect your business from financial turmoil.
7 Tactics for Avoiding Financial Troubles in the Year Ahead
There are several ways to shield your company from financial risks. They include actions you can take and assistance you can get through products or services from others. Used together, they can provide reassuring protection from a wide variety of events that could otherwise adversely affect your company.
A strong financial protection strategy benefits your company in a few ways. First, you experience fewer immediate financial losses. That’s reason enough to be proactive in addressing potential financial challenges. But taking action can also prevent a potentially devastating cascade of issues.
For example, as your business recovers from a minor loss, you have less capital for enhancing existing products or services or developing new ones. As a result, you fall behind your competitors. You also fail to attract new ones, creating a dangerous downward spiral in revenues and business opportunities.
How can you prevent this? Take the steps below to insulate your business from financial problems.
✔️ 1. Create a business plan.
The excellent quality of your products and services alone probably won’t be enough to maintain your company’s success. Competitors with similar offerings who have a defined strategy for promoting them will garner more attention and grow their customer base. And every customer they add is one you don’t. You need a detailed plan for how you’ll leverage your financial resources in the year ahead to operate your business and increase revenues. It’s common for companies to go out of business simply because they run out of capital before they’re generating revenue reliably. A business plan makes it clearer where your revenue will come from and what to do if any of those streams start to slow or dry up entirely.
✔️ 2. Identify and minimize liability risks.
Countless companies every year find themselves in financial trouble because someone sues them. All it takes is a lawsuit from someone who slips on an icy sidewalk at your headquarters and breaks their wrist to go from record-setting profits to a large financial deficit. Having small business insurance (see below) to cover court-awarded damages, your legal fees, and other related costs is critically important. However, it’s even better if you take action to help ensure incidents never occur. Things like promptly shoveling and de-icing walks, attending to wet floors, securing rugs so they don’t slide, and repairing damaged carpet can significantly reduce your risks. You should also educate your staff about safety best practices for your industry. And if your employees drive company vehicles for work purposes (to get supplies, make deliveries, attend client meetings, and so on), you should document your rules regarding how people are to operate your vehicles. One of the most important requirements today, of course, is a firm ban on texting while driving.
✔️ 3. Buy business insurance.
There are several types of business insurance policies, each covering different risks. Policies you may need based on the type of work you do, your company’s location, and other factors, include: workers’ compensation, general liability, professional liability, commercial auto, cyber, umbrella insurance, and a business owners policy (BOP). Small business insurance is very affordable, with policies commonly providing six-figure protection for just hundreds annually.
✔️ 4. Ensure that you have adequate cybersecurity.
Cybercrime continues to rise, both in frequency and severity. Failing to have appropriate defenses in place increases your risk of being hacked and letting sensitive information get into the wrong hands. And the financial repercussions can be significant, with expenses (for you or your insurer, if you have cyber insurance) that include the cost of notifying customers of an incident, conducting security audits to determine how a hack occurred, and steps to defend against future attacks.Be aware that it’s not just large corporations that get targeted. In fact, some cybercriminals may focus their attacks on smaller companies, believing they have weaker security.
✔️ 5. Have a lawyer review your business contracts.
Ambiguous contracts between your company and your clients, business partners, or vendors can cause confusion at a minimum and may result in lawsuits in some instances. An attorney can review these documents and ensure that they clearly define the responsibilities of all parties. Avoiding lawsuits is essential since you have to pay to defend your company even if an accusation is baseless.
✔️ 6. Create and maintain an emergency fund.
Being prepared to address an issue promptly may prevent follow-on expenses. For example, if an essential piece of equipment dies, being able to pay for repairs or replacement can reduce the overall cost of the incident from issues like downtime, etc.
✔️ 7. Care for your business assets correctly.
It’s much more cost-effective to put time and effort into maintaining assets than buying new ones. From computers to vehicles to infrastructure, the investment pays off many times over. For instance, taking actions to stay within the warranty requirements on an expensive machine ensures ongoing coverage so you don’t incur a large repair or replacement expense.
Now’s the Time To Protect Your Business
No expense feels worse than one you could have avoided. Fortunately, actions like insuring your business, maintaining your expensive assets, and putting away funds “for a rainy day” can help your business avoid potential financial pitfalls in 2023 and beyond.
No comments:
Post a Comment