Understanding Risk Management for Small Business

Operating a successful small business involves decisions in several areas , one such area is risk. Risk, is the exposure to danger, harm, or loss. For businesses the term usually applies to the risk of financial loss.

Whether you have just starting your business, or you have been trading for a while, protecting the business you worked so hard to build is a priority. Unfortunately, it’s a step that many entrepreneurs neglect in the rush of launching a startup and operating day-to-day.

 

Here are several steps you can take now to protect your small business.

 

Choose the right form of business

Operating as a sole proprietorship — the default business structure for a one-person business — may be easy, but it’s not necessarily the best choice to protect your business. For one thing, the sole proprietorship structure doesn’t protect your personal assets. That means if a customer decides to sue you or a vendor demands payment that your business can’t afford, your savings, home and other assets could be fair game.

 

Hire a lawyer

You may not need to use a lawyer that often, but when you need one, you need one fast. Ask other entrepreneurs, business colleagues and friends for recommendations to lawyers who are familiar with small business issues. Take the time to compare lawyers by scheduling an interview with each before you hire them. Discuss payment options — most lawyers have different payment options for smallest businesses.

 

Find an accountant

Even if you plan on doing the bookkeeping yourself, a good accountant is worth the price. Who has time to keep up to date on tax law changes? You sure don’t — but accountants do. Not only can they save you money on your taxes, they can also provide valuable advice on how to structure your business, the best way to finance expansion, and how much to pay yourself.

 

For suppliers and contractors: Be smart about new customers

Before taking on a major new customer, conduct a credit check. This helps protect you against unpaid invoices. Never do business without a written contract — no matter how confident you are in the customer’s word. If something goes wrong, a contract may be the only thing that ensures you get paid for your hard work.

 

Buy business insurance

Most businesses need general liability insurance, and if you provide advice or professional services to customers, you may also need professional liability insurance, also known as E&O (errors and omissions) coverage. If you have employees you are required to have workers’ compensation insurance. Other insurance products to consider include key man insurance on your life and the life of other key employees, business interruption insurance (which protects your income if your business has to shut down due to a disaster), product liability, and cyber-insurance.

 

Protect your employees and customers

Disaster can strike any time, so it’s important to have a disaster plan for what you will do in case of emergency to protect your business. Create a plan and assign responsibilities for how to get employees and customers out of the building safely, what to do if a disaster keeps you and employees from getting to your business, and how you will keep running even if you can’t get to your physical location. Learn more about creating an emergency disaster plan.

 

Protect your business data

Back up your company data and documents with cloud storage so you can access files anywhere. When your information is stored in the cloud, you don’t have to worry about a crashed hard drive, or how a fire on your premises could wipe out precious data. To protect your business from cyber-crime and hackers, install appropriate firewalls and, more importantly, train your employees in cyber security measures, such as creating strong passwords.

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