Business Owners: How to prepare for the unexpected
As a business owner, the unexpected can always happen. No business is bulletproof. But if you’re not prepared for the unexpected it can put your business at risk. In honour of national preparedness month, we’ve put together a guide for business owners that can help you prepare for the unexpected.
1) Keep on generating new business
Getting a big contract with a major client can be great news. It can help keep your business afloat and ensure that you have a regular income coming into the company. However, relying solely on them for business can be risky. If you were to lose that client, it could possibly jeopardize the future of the business. Generating new business regularly can help to combat this risk. If a large client no longer needs your services, your business won’t fold due to new business. Focusing on generating new business creates a steady stream of work that can keep your business profitable.
2) Protect your business loans
Most new businesses rely on business loans or an overdraft to get started. Taking out a business loan is not uncommon, especially for smaller businesses and startups. However, if you take out a business loan, it can really help to have it protected. Business loan protection is offered by most lenders. However, it may be worth doing a little digging to get yourself a better deal. If you were to become seriously ill or pass away, then that loan can be recalled by the lender. This can often lead to financial difficulty for the business. As a result, it can leave suppliers or customers short, put employees at risk or lead to business closure. In some cases, the loan may fall into your own estate which could cause financial difficulty for your family. Protecting a business loan against this can, therefore, protect those around you and ensure that you’re prepared for the unexpected.
3) Adapt to your customers
Over time, your client’s needs will constantly be changing and evolving. Keeping up to date with the latest trends in the market can help you to adapt to their changing needs and provide them with solutions to their problems. Think about large retailers on the high street that are closing down, such as Toys R Us. The business didn’t adapt to client’s needs who were shopping more online. As a result, the company announced they were in administration in April 2018. Understanding your customers and their changing wants and needs can help you to stay in the game. As you adapt to your customers, it can help you to prepare and protect your business.
4) Protect your key employees
A lot of businesses are familiar with insuring their equipment and business assets. Yet a lot of business owners forget to insure their most important asset; their people. As a business owner, if you were to lose a key member of your team, it could cause a large financial impact. For example, a sales manager with strong client relationships or a systems developer with expertise in your company operations. A key employee is anyone who is crucial to the successful running of the business and may contribute to the value of the business or company profits. Losing a key employee could lead to financial difficulty for the business in terms of lost profits, loss of goodwill, recalling loans or debts or loss of customers. In addition to this, it can lead to the need for the recruitment and training of a replacement which can be costly for a business.
Key man insurance can be vital for businesses with a small team they rely on. It can help protect the business from losing a vital contributor to the business. Business owners, directors and key members of staff can get access to key man insurance. The policy is paid for by the business and can be tax-efficient in some cases whilst providing the company with a fund to cover any loss of profits.
5) Create an emergency fund
Unexpected occurrences such as equipment breakdowns, natural disasters or utility issues can all cost your business money. Creating an emergency fund to cover these costs can help to protect against financial difficulty. If you don’t have enough extra money to cover these costs, insurance can provide help. However, it often takes a while for the business to make a claim and have it approved. If you are able to, an emergency fund can help to finance the business due to loss of equipment, interruptions in operations and generating profits. In order to prepare adequately, a risk assessment can be useful, so you can weigh up any potential threats to the business.
6) Keep on top of changing laws and regulations
If business owners cannot keep up with changing laws and regulations can be bad for business. Not only could you put your business at risk but ignoring changes in the law could result in hefty fines. Being prepared and keeping up to date with the latest laws and regulations can help to protect your business. I’m sure we’re all familiar with the recent GDPR and data protection changes. Not only could you face fines without keeping up to date, but also disgruntled customers, loss of reputation or even jail if you don’t comply with business laws.
7) Put together a business succession plan
Creating a plan to ensure you have a business succession plan can be vital for many business owners. At some stage, you are likely to leave your business. Whether you decide to sell, retire or unexpectedly pass away, having a succession plan in place can help to protect your business. Without a plan in place, the future of your business can be at stake. Often, a business owner will have worked hard to create a successful business so the thought of losing it can be inconceivable. One of the most important tools of a successful business succession plan is a life insurance policy.
A life insurance policy for business owners can help to protect your family and keep your business running. It can be used to pay back business loans or commercial mortgages, buy back the share of a business or provide a financial security net for your family. Policies such as key man insurance or shareholder protection can help to protect your business against losing a business owner.
Shareholder or partnership protection allows the business partners to buy back the share of the business. Not only does this protect the business, but it also can provide the family with a financial sum to meet mortgage payments and pay bills whilst adjusting to life on one income.
Putting together a suitable plan for business continuity and succession can help to give business directors peace of mind. Not only that, but it can really help to protect your business, partners, employees and loved ones against the unexpected.