Making Sure Your Business Can Bounce Back: the Best Ways to Prepare for the Unexpected

The business environment is constantly changing. Even the most carefully conceived business plan cannot claim to be bullet proof in a dynamic setting in which there are too many unknown and unpredictable elements.

The success and longevity of a business in any industry will depend on its agility to deal with change and unexpected events. These events may involve natural catastrophes that cause business interruptions and losses, like hurricanes or earthquakes, or other events may be a result of man-made debacles, like 9/11. Still other changes may result from economic upheavals like the banking crisis or a stock market crash.

That said, businesses need to focus on their core activities to ensure profitability. When the sky is falling (or appears to be), a company destined for greatness continues to go about its business without blinking. It can afford to do so because the company is assured of some measure of protection.

Savvy entrepreneurs understand that business insurance is crucial to its survival. Cash flow may be nil during the start-up stage especially among small businesses, but insurance coverage is a non-negotiable item on the budget. Coverage may include some or all of the following:

Property and Contents Insurance – Capital assets including the building and equipment may be damaged or destroyed in a fire or a hurricane. The business will have some hope of recovering because its property insurance policy will provide a means to replace or repair its business assets

General Liability Insurance – It’s a must-have policy for business owners to protect the business from liability issues that may arise when employees and customers suffer some harm on company premises. This insurance also protects the company from negligence charges when someone is harmed as a result of using their products. The cost of defending and litigating such charges can push businesses into bankruptcy.

Business Interruption Insurance – Business interruption insurance protects businesses from incurring devastating losses as a result of business closure due to floods, riots and other circumstances specified in the policy. Having this type of insurance can stave off the liquidation sales in favor of customer appreciation specials.

Home-Based Business Insurance – These policies are an important consideration because the typical homeowners’ insurance would limit or exclude business assets from coverage. These policies would cover property and general liability insurance for the business.

Key Person Insurance – Another aspect that must be addressed at the outset to ensure business survival is leadership succession. Many businesses experience some hiccups with a change in leadership regardless of the reason for the change. Family businesses are more sensitive to these changes than big business. At the very least, defining the succession process if not the successor will help to smooth the transition without peril to morale and profits. Key person insurance will reimburse the company for losses that might arise from the unforeseen loss of its key leadership. The compensation is intended to tide the company over until a replacement is chosen.

Buy-Sell Insurance – Set up by a partnership as a funds source to buy out the stake of a departing or departed partner, this arrangement will avoid dissolution of a viable business in the event that a partner opts out willingly or not.

The importance of business insurance cannot be underestimated. Having these policies in place is as good as having a fairy godmother who can wield her wand to conjure solutions in crisis situations. It is best to deal with experienced and reliable sources such as when purchasing business insurance. Centralizing insurance needs from one provider makes financial sense as multi-line discounts are often available. Additionally, using one source will limit coverage overlaps and unnecessary provisions that could result in higher premiums. The most important thing is that you get the coverage you need without paying for things you don’t.

Originally Published

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