If you think life is a risky business, then how much more risk is there in business? Well, there’s a lot. And while some of it can be transferred to other entities (such as liability on the road, or damage from natural disasters) other types of risk (like keeping a full staff) can not.
Retained Risk
There’s inherent risk in the very act of becoming an entrepreneur. There are no guarantees for success. It takes a certain kind of person and mindset.
Many have tried to measure and quantify the recipe for success: one half cup of vision, one quarter cup of self-discipline, one eighth cup of creativity and another eighth cup of empathy. None of that addresses the guts it takes to mortgage your house and take out a loan that could wreck your peace and the livelihoods of your family (and your employees’ families) should you fail.
Some risks can’t be mitigated; they just are. This is what makes entrepreneurs very special people. They have the guts to take risks.
Other risks may include finding and keeping the right talent, the regulatory and procedural costs of pandemic management, supply-chain issues, and failure to innovate into the future when you’re so focused on emergent issues today.
Follow Expert Recommendations & Industry Best Practices
These certain types of risks are “retained” because you can not take out an insurance policy to hedge against a labor shortage or supply chain shortage. In the case of retained risk, all you can do is listen to expert advice, follow best practices, and commit to continuous learning and improvement.
For example, specifically looking at staffing issues, just here on the Team Engine website, you’ll find resources such as:
- Blue-collar job description templates
- A checklist for how to get more applicants
- Examples (by industry) of Facebook and Instagram recruiting ads
- 9 ideas for blue-collar team building ideas
The act of learning from industry experts and others who have been in your shoes before is the best way to mitigate these retained risks. Identify the areas where you struggle or need to improve, find influencers and consultants who are knowledgeable in those areas, follow them on social media, subscribe to their email newsletter, listen to their podcast, buy their books… and so on.
Transferred Risk
Business insurance was created to help entrepreneurs mitigate certain kinds of risk that have certain characteristics. For the insurance company to accept this transfer of risk, the following must apply:
- The insurance company must be able to reliably predict the future based on a large number of historically similar risks and previous loss experiences.
- The loss must have a measurable monetary value.
- Losses must also be considered uncertain, meaning there are no guarantees. You might use it, you might not.
Here are few specific types of business insurance available to you as a business owner:
Business Owners Insurance
What if a tornado damaged your business to the point that you needed to close it for awhile? In addition to helping provide coverage for the damage to your building, business owners insurance may cover loss of income while you get your contingency plan in place. (You do have a contingency plan for emergencies, right?)
Business owners insurance can also help provide liability coverage for lawsuits due to negligence, damage to vehicles your company doesn't own, damage to other people's property, medical expenses if someone is injured on the premises, contents of your building and much more.
General Liability plus Fire Insurance
Let's say you own a flower shop and one of your employees was watering a display of plants. The employee stopped watering the plants to help a customer and didn't put up a caution sign that the floor might be wet. Meanwhile, another customer came in and didn't see the water on the floor. She slipped, fell and broke her elbow. If you have general liability insurance, it may help cover reasonable medical expenses for that customer's injuries.
Commercial fire insurance, obviously, provides coverage for your building if it is damaged by smoke or a fire. What might surprise you is that it may also provide coverage for damage due to lightning, wind, hail, explosions, vandalism and more. You also have the option to add additional coverage for collapse, water damage, falling objects and weight of snow or ice.
Commercial Vehicle Insurance
If commercial vehicles are critical to the success of your business, you need to make sure you have the proper coverage on those vehicles to avoid a catastrophic loss if one of your employees causes an accident. This is one of the most misunderstood coverages among small business owners.
A Note of Caution: Why a Personal Auto Policy Won't Do the Job
If the vehicles your company uses are tractor-trailers or busses, you probably don't question the need for business auto insurance, but if you own a flower shop and your employees drive a van to deliver flowers, you might think a personal auto policy will cover your losses in an accident.
This could lead to an unpleasant surprise if the driver has an at-fault accident. Even though the delivery vehicle is a van, it might not be covered under a personal auto policy because it was being used to deliver commercial goods. This is not what you want to hear when a claim is being made, especially if that claim involves injuries to another party!
It's even trickier when it comes to cars that employees drive as a part of their job. For instance, if one of your sales reps is driving a company vehicle and causes an accident with injuries, the injured parties may sue your business for any damages that go above and beyond the policy limits a personal auto policy would provide. In either of these scenarios, you are putting your business at risk of financial hardship.
Business auto liability insurance for vehicles often carries higher liability limits that might go beyond damage to the vehicle itself. That coverage could include for passengers or equipment being hauled, and may go even further to include rented vehicles, trailers, and vehicles your company doesn't own but are being used by your business under your supervision. This is all protection that a personal auto policy generally won't provide.
In business and life, there are risks. Understanding how to mitigate them is the first step to having peace of mind as a business owner.
