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How to Future Proof Your Small Business

Updated 01:44 PM EST, Wed July 3, 2019

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As a small business owner just starting out, everything is new and exciting. However, it is just as easy to overlook the risks that come with owning a business. Many small businesses fail to plan for critical risks that could lead to problems down the road – future proof your business from the beginning by having small business insurance.

Top Risks for Small Business Owners

As a business owner, you’ve already registered your company with the ownership structure that best meets your needs. You’ve also made sure to:
  • Obtain licenses and permits to meet regulatory requirements
  • Sign contracts with suppliers
  • Hire your first employees
The moment you officially open for business, you open yourself up to a host of additional risks. These risks boil down to four key areas:
  • Financial
  • Legal
  • Staffing
  • Property

Small Business Financial Risks

When you start a business, the biggest financial risk is running out of cash before you can prove your success. You can avoid this by planning now to get ahead of the revenue growth curve.
As a small business owner, cash flow is at the heart of almost everything you do and think about. You need a solid financial plan that includes your fixed and variable costs as well as expected revenue and growth. This allows you to forecast money coming in and out over the next months and years.
You can also use your financial plan to assess any financing or fundraising needs. This ensures you can cover your expenses until your business starts adequately generating recurring revenue. Consider all possible sources of capital, including:
  • Bank loans
  • Private investors
  • Grants
Consider using your personal funds only as a last resort. Putting your personal finances on the line only adds more risk.

Small Business Legal Risks

Lawsuits are rather ubiquitous these days, and they pose a serious risk to business owners. Not only can they be extremely costly, but they can also damage your reputation.
Remember the story of how one consumer sued McDonald’s after burning herself with hot coffee in 1992? This was so costly for McDonald’s that food service companies took notice. They’ve explicitly labeled hot items ever since. Legal risks like the one McDonald’s faced can pop up in unexpected ways. Some other legal risks to consider include:
  • Copyright and IP infringements
  • Defective products
  • Black ice on your doorstep
The best way to protect yourself from legal risks is to obtain business insurance. Business insurance comes in many different forms. You’ll want to think about where your business is most vulnerable to lawsuits and secure coverage to protect those areas. For example, product liability may help in a claim that’s similar to the hot coffee incident. Premises liability can help protect you if someone gets injured after tripping over a cord on your work premises. Employer liability is usually required for businesses with employees.
A good place to start is with a business owner’s policy. This covers business property, business liability, and business income. This coverage can help protect you from property damage, theft, lawsuits, and even loss of income if your business has to shut down temporarily.

Small Business Staffing and Employment Risks

Your employees are central to the success of your business. You can’t operate without them. That’s why you need to make sure you can trust them. Two big staffing risks you could face include:  
  1. Employees suing you if they feel you’ve infringed on their rights
  2. Employees misrepresenting your business
Once you bring people onboard, you’ll want to provide a safe and comfortable working environment. In addition to this, you’ll also want to:
Neglecting any of these requirements may put your business at risk.
As a small business owner it’s also important to hire the right people. That means people who share your company values. You want employees who will take as much care of your business and your customers as you do.
To help your employees accomplish this, you’ll want to equip them with the right tools and training. This helps ensure that they perform and deliver. Hiring the wrong people or failing to train them correctly can be detrimental to your customer service and product quality. At its worst, hiring the wrong people can open up grounds for customers to sue your business.

Small Business Property Risks

Aside from cash and people, your next biggest asset is your business property. This not only includes the physical location from which you operate, but also any equipment and inventory you own. Protecting your business property against damage, destruction and theft is critical.
While no one wants to think about catastrophic events that could put you out of business, they can happen. Failing to attend to these risks could set you up for a devastating loss – something your small business may not be able to survive. Taking inventory of your business property can be helpful in the event of a loss. You can also put a contingency plan in place.
A solution to pending risk is insurance coverage. For instance, commercial property insurance can be purchased separately or as part of a business owner’s policy (BOP). Your BOP policy also includes general liability insurance, which can help cover you if someone is injured at your business. The BOP also includes business income insurance. This can help pay for lost income if you’re forced to shut down due to covered damages.
There are many optional extras for this type of policy. An insurance agent can help make sure you get the right coverage for your needs.

Plan for the Future

There is a lot to consider when setting up a new business. Thinking about the future and its potential risks can help you get ahead of them. There are certain factors like market dynamics that you can never protect yourself. Therefore, it’s important to plan for the factors you can’t control.
This article provides general information, and should not be construed as specific legal, HR, financial, insurance, tax or accounting advice. As with all matters of a legal or human resources nature, you should consult with your own legal counsel and human resources professionals. The Hartford shall not be liable for any direct, indirect, special, consequential, incidental, punitive or exemplary damages in connection with the use by you or anyone of the information provided herein.

Certain coverages vary by state and may not be available to all businesses. All Hartford coverages and services described on this page may be offered by one or more of the property and casualty insurance company subsidiaries of The Hartford Financial Services Group, Inc. In TX, this insurance is written by Sentinel Insurance Company, Ltd., Hartford Casualty Insurance Company, Hartford Lloyd’s Insurance Company, Property and Casualty Insurance Company of Hartford, Hartford Underwriters Insurance Company, Twin City Fire Insurance Company, Hartford Accident and Indemnity Company and Hartford Fire Insurance Company. In CA by Sentinel Insurance Company, Ltd. (CA license # 8701) and its property and casualty insurance company affiliates, One Hartford Plaza, Hartford, CT 06155.
The Hartford® is The Hartford Financial Services Group, Inc. and its property and casualty subsidiaries, including issuing company, Hartford Fire Insurance Company. Its headquarters is in Hartford, CT.