Entrepreneurship Comes With Risks. Here's How to Mitigate Them
Opening your own business is a thrilling milestone. The sky's the limit and if you're smart and creative enough, you may even exceed your wildest dreams. But entrepreneurial pursuits can also leave you wide open to liability for employee and customer safety, putting everything you've worked for at risk. That's why it's important to have the correct kinds and limits of insurance coverage—but it's even more critical to mitigate the risks.
Where to start? That old axiom, safety comes first, is timeless for a good reason. Safety not only ensures the health of your employees and customers, but the ripple effects of expensive settlements, negative press and potential loss of business can be difficult to overcome. The good news is that most safety issues are preventable with a little foresight and action.
Research Your Risks
What are the most common and significant risks in your industry? It will be a little different for everyone. If you're serving alcohol at a restaurant for example, your safety issues will differ than a business that uses power tools, vehicles, or chemicals. You'll also want to do a deep dive into the hidden costs that compromise safety. Excessive employee turnover, for example, may lead to lack of institutional knowledge and best practices. And you don't know what you don't know. Consult the Occupational Safety and Health Administration, commonly known as OSHA, for regulations and requirements around workers' compensation and regularly schedule property inspections and maintenance for fire, electrical, plumbing and structural elements of the building. Your insurance agent may also have some requirements (such as installing handrails) to make sure you are in compliance with your coverage agreement.
Here are some other important steps to consider:
Evaluate your risks: Take a tough, unflinching look at anything around or in your physical space that can cause someone to slip, trip, or otherwise fall. What's the customer journey from parking lot, through the front door, into your space and back? What paths do your employees take during their day? If there's anything that can be considered a safety hazard, make sure to remedy it.
Secure your space: This means mitigating risks in employee and customer areas and making sure there are adequate and functional sprinklers and extinguishers on site, as well as first aid kits for injuries and chemical burns. Keep inventory, tools, cords and cables, cleaning products, paperwork and virtually everything else organized (which also helps with productivity) and immediately address hazards such as unsafe wiring, trip hazards and slippery floors.
Create a culture of safety: Not only should employees know what to do in case of emergency, but they also need to understand how to prevent incidents from happening by undergoing training, wearing the correct clothing and gear and using tools properly. And it's also important to have a process in place for documenting events when they happen with written description, photos and/or videos. Timing is critical, as many insurance and police or fire investigations rely on fresh evidence within the first 48 hours.
Understand your liability: If you are renting property, have an attorney check out the lease before your sign it. If you don't have certain conditions spelled out in your contract (for example, adding sprinklers or installing handrails), you may be signing away your right to a safe and secure space, which could cost thousands of dollars to correct.
Keep data safe: Hackers are sophisticated and can compromise (or immobilize) your data in a matter of seconds. Make sure you engage a company that specializes in data security, train employees not to fall for social engineering or “phishing" scams, and obtain cyber coverage from your insurance company, just in case.
Be Prepared for Anything
Even with the most careful planning and stringent prevention measures, accidents can happen. Talk to your agent about how to protect yourself with the right insurance policies as well as any additional policies you may need, as outlined by the Small Business Administration and the National Association of Insurance Commissioners.
Here are some common scenarios you'll want your plans to address:
- Business interruption: A car crashes into your building and there are extensive repairs required before you can go back to work. How do you keep the cash flowing so you can pay the bills and meet your obligations? Part of it may be covered under existing policies, but make sure you know your payout limits and when you'll get compensated to keep everything running as smoothly as possible.
- Protecting your property: A natural disaster, vandalism, fire or something else damages your property. What is covered under your policy? Often, earthquakes and floods require separate riders. Make sure you understand what's covered.
- Employee benefits: What happens when your employees are hurt on the job, and what if they need health care coverage? Some states require disability and health insurance; for others, it's a benefit. You can also offer life insurance as an employee benefit. “Key person" insurance kicks in when someone who is essential to the business is unable to perform the tasks due to illness, injury or death.
- Home-based business: Let's say the washer overflowed right into your home office, damaging electronics and inventory. This addresses the gaps that might not be covered with your regular home insurance if there is damage to your workspace.
- Liability: There are endless scenarios—your delivery person slips and falls, there's a malpractice or negligence case that doesn't go your way, you've been dealt some defective products — liability insurance can help cover you when you want to plan for the worst but don't know exactly what that will be.
- Unemployment: Are you covered in case you need to lay off workers? The laws around paying into unemployment tax vary by state; visit the government's website to learn more.
- Vehicles: If you or your employees drive as part of the job, you may need commercial vehicle insurance. Your employees and contractors may not be covered by their personal policies when driving for work.
- Worker's compensation: This is handled through an insurance company, through the state, or sometimes companies can self-insure.
If all this seems overwhelming, just know you don't have to figure it all out alone. There are trained professionals who can help you navigate your insurance needs and get you on the right track to enduring success and peace of mind. Connect with a Westfield agent today.