How can business owners best protect their companies? You may have heard the most common small business claim is theft. This is true, but it’s not the most costly one. Reputational harm claims top this list. These claims include libel, slander, and violation of privacy.
The average cost for these claims is $50,000. If the claim involves a lawsuit, the price skyrockets. Costs to defend and settle the suit raise the average cost for these types of claims to more than $750,000. Typically, around one-third of all general liability claims result in a lawsuit. For small businesses without proper coverage, these suits can prove devastating.
Of course, the preferred solution is to avoid these claims altogether. To protect your business from reputational harm claims, take the following precautions.
Ask permission, not forgiveness. Would you like to post photos on your website or use them in your marketing materials? Do you plan to use a quote or other content for your next marketing campaign? Before you launch your initiative or post your social media blast, get permission to use these items. Copyright and privacy suits can prove costly. Obtain written permission to avoid reputational harm claims. Additionally, ensure all employees are aware of your permission policies.
If you can’t say something nice… Cutthroat competition can make criticizing competitors a tempting tactic. Don’t do it. When speaking publicly or with customers, avoid criticizing competitors. If you never say anything negative about them, they will not have any ammo to use for a slander suit.
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Are Entrepreneurs Born or Are They Made?
What makes entrepreneurs successful? Is it how they’re wired? Is it a certain inherited ability, innate instinct, or genetic quirk?
The truth is, there are some inborn traits that characterize successful entrepreneurs. Entrepreneurs as a breed tend to be self-confident, action oriented, adaptable, and able to deal with uncertainty.
Attributes such as optimism, curiosity, risk tolerance, and moxie – not to mention the good luck of being in the right place at the right time to bring their ideas to market – all figure into the equation.
However, many of the qualities associated with entrepreneurial success are acquired through life experiences. These include patience, tenacity, self-discipline, a strong work ethic, and the ability to overcome failure and “keep on keeping on.”
Education matters too. You cannot achieve success as an entrepreneur unless you grasp the basic fundamentals of running a business and the dynamics of your particular industry.
And then there’s practice. Negotiating, problem solving, spotting trends, understanding markets and customers – these are skills that take time to master, and there is simply no substitute for practice.
Ultimately, the reason why some entrepreneurs are successful and others fail is not just good genes, brilliant insights, good luck, hard work, education, or practice. It is a combination of all of these things. Entrepreneurial success involves using innate skills as well as those learned or acquired along the way to build a successful business.
It has been said that “the harder you work, the luckier you get.” And while having entrepreneurial DNA may allow someone to hone the creative instincts and inborn attributes they possess, every successful entrepreneur must prove their DNA with hard work.
Building the Right Cash Reserve for Your Business
Knowledge and preparation are as constant in the life of an entrepreneur as the daily sunrise. Paramount to this ongoing focus is cash liquidity.
Upward trajectory in business requires incoming cash to exceed cash outflow. Keeping the bills paid when cash collections are low is an exercise in perseverance to achieve the ultimate objective of positive cash flow.
When cash flow is negative, you have to dip into a reserve that you’ve built as a safety net. The appropriate size of this cash reserve is related to the volatility of your sales. For a business with steady collection of revenue, reserving cash that covers a couple of months of overhead is probably sufficient.
If any uncommon cash crunch arises, you can still meet your obligations while making adjustments for a return to cash flow stability. To determine this figure, you merely need to know the amount of your recurring monthly costs.
Conversely, a business engaged in extended projects over many weeks may require enough cash reserve to pay for several months of expenses. The key measure is the average period that elapses between project start and customer payment. If there are delays in starting or getting paid, you can weather these times with an appropriate cash reserve.
Business owners with a lot of cash in their companies are frequently tempted to overspend. On the other hand, holding more cash than is needed as a reserve is inefficient.
Once you identify a sound amount of emergency cash to hold in reserve, any excess may be deployed to grow your business.
Take a Bite Out of Crime (and Your Insurance Premium)
Listing every potential crime that could occur against your business would be a daunting task. Small-business owners face risks from employee crime, nonemployee crime, and cybercrime. Any of these could result in claims that cause your premium to rise.
The good news is, you are not helpless against these crimes. There are effective steps you can take to keep your workplace protected against each type of crime. Putting these safeguards in place will prevent loss, injury, and increased costs. Help keep your business crime-free with the following tips:
Prevent Employee Crime
Vet your people: It may involve a lot of legwork, but it’s worth checking into the people you hire. Contact references and perform background checks for any potential employees. Be sure you are hiring trustworthy people.
Avoid violence: Do you have a written workplace violence-prevention policy? If not, develop a comprehensive plan that covers the consequences of committing acts of violence in the workplace and procedures to follow if such an event should occur.
Require audits: Reduce the opportunity for internal theft by requiring audits for all employees who handle invoicing, receipts, or payroll. These regular audits require extra effort, but the accountability can help prevent major losses.
Establish safety: Ensure every employee is properly trained on safety procedures and is aware of all company policies. Business owners who do not meet OSHA standards run the risk of breaking laws regarding safety regulations. Avoid penalty fees and lawsuits by remaining in compliance with all standards.
Prevent Nonemployee Crime
Use surveillance: Keep all areas of your business in sight. Use security personnel, mirrors, or surveillance cameras. Encourage employees to engage customers. A vigilant eye is helpful to protect your assets and avoid theft claims.
Install security: Apply physical security measures at your business. Install quality locks or a company-wide security system. Limit access to high-risk areas.
Light the way: Dark areas invite dark deeds. Ensure all areas of the property are well-lit. Add exterior lighting if none is present. Change all burned-out bulbs right away. Keep things bright and welcoming for employees and customers, and uninviting for crime.
Back it up: Keep backup copies of all records either on additional storage devices or off-site. A loss of data could mean anything from a minor setback to a major cost. A large breach can spell disaster for a small company.
Monitor access: Limit the number of employees who can access all company information. Be especially prudent about access to finances and personal client information.
Be software smart: Use strong passwords and proper firewalls to protect your data. Remain current on software updates to keep defenses strong. Change passwords regularly. Negligence in these procedures can prove costly.
As you make these efforts, you will make your company safer, more inviting, and more cost-effective.
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