Understanding risk is essential for anyone starting a new business. The same is true for anyone insuring a new business, says Jeffrey Olmstead, assistant vice president of property underwriting in the small commercial area at The Hartford Financial Services Group Inc. in Hartford, Connecticut. Insurance is available for many risks, but not all of them--especially business risks. "That can include the risk that [your] market won't materialize, that [your] location isn't appropriate, or that [your] customer base isn't looking for the products [you] are selling," says Olmstead. "Insurance is designed to help businesses manage certain kinds of risks, but not all the risks associated with running a firm." The following tips will help you decide on the best level of coverage:
44. Ask an expert. "The world of commercial insurance can be somewhat complex," says Olmstead, "and we recommend a good advisor to [help] a businessperson understand risk and select insurance to protect against that risk." To get the broadest selection of coverages and policies, it's best to consult a licensed insurance agent who represents multiple carriers.
45. Think about the kinds of risks you'll be exposed to, such as property loss. "That's exposure to loss of the building or business property such as equipment, machinery, stock and computers," Olmstead says. Perils to property include fire, flood and the like.
46. Carefully consider your liability. For example, third parties such as customers or others might sue the business for injury or property damage caused by the business. Umbrella liability policies are one popular solution to this risk. An expert advisor can help you tailor liability coverage to fit your circumstances.
Injury to employees is another area of potential liability. Workers' compensation insurance is required for almost all businesses in almost all jurisdictions. "That's a key distinction [from] property and liability," Olmstead notes. "If a business owner chooses not to acquire property and liability coverage, that's a chance they can take. But with regard to workers' comp, it's required."
Other risks depend on the business you are getting into. A restaurant that serves alcohol faces potential liability if one of its customers is involved in an accident after leaving the restaurant. "That's a specialized exposure," Olmstead says, "and there is specialized coverage for liquor liability that covers against lawsuits that come back to the business owner because of improper service of alcohol." Understand your business thoroughly so you can decide whether or not to pursue specialized coverage.
47. Shop around. After getting a good advisor and understanding your exposures, evaluate several providers and policies. "Ultimately, business owners are responsible for the coverage they buy and the premiums they pay," Olmstead says. "Select carefully."
48. Don't become complacent, even if you have insurance. Some property or liability lawsuits might not be covered. There are no insurance products available to cover against some exposures. In other cases, the cost of coverage may be too high. When this happens, manage risk by taking appropriate safeguards, such as training employees to work safely. You'll often get lower premiums and fewer losses if you take wise precautions to reduce even those risks that are insured.
49. Stay alert for new threats or possibilities you may not have considered. You might need additional coverage or other risk management. "If something is not covered by insurance--or even if it is covered--it can be catastrophic for a small business to experience a loss," Olmstead says. "One of the big concerns right now is that so many of our businesses in New Orleans are not covered by insurance. They had hurricane insurance, but not flood insurance. So many of those losses from the hurricane will not be covered as a result."
Continue learning: Visit our Insurance Center to learn how to best protect your business against the unexpected.
Up until now, you've been the jack-of-all-trades for your business, but it's getting beyond your control to do it all. Don't worry--feeling overstretched is actually a good thing, because it means the company is growing.
It also means it's time to hire your first employee. But before you jump into the wonderful world of hiring, firing, scheduling, and those oh-so-fun OSHA and labor regulations, take the time to devise a strategy that will get you through the next couple of years. Your goal is to steer clear of the four horsemen of the workplace apocalypse: turnover, lost productivity, lawsuits and low employee morale. Here are a few tips for making your hiring process work for you instead of against you:
50. Do the paperwork. You'll need an employer identification number, or EIN, to include on IRS documents once you start hiring employees. Fill out IRS Form SS-4, downloadable at www.irs.gov . (An attorney can also take care of this task.) Having employees means paying state unemployment compensation taxes and workers' compensation insurance, too. Your best immediate resource will be your accountant, who can help you navigate federal, state and local employment regulations.
51. Know what you're looking for. When people date, they have a list of qualities they're seeking in a mate. Likewise, you need to define the job you're looking to fill, the skills that will be needed to do it well, how much you can afford to pay and what the best candidate will be able to do. "That seems obvious, but a lot of people don't do it. They hire a friend of the family or someone their brother-in-law knows," says Ralph Warner, author of How to Run a Thriving Business: Strategies for Success and Satisfaction and founder of Nolo, a Berkeley, California, publisher of do-it-yourself legal books, forms and software for consumers and small businesses. "Your business is going to get off to a much better start if you're working with the best person within [your] category."
52. Deepen your talent pool. Attaining more than one degree of separation in your hiring process can be a good thing, so learn to branch out early on. Local schools and colleges offer job centers where you can post job openings--that's one good place to start building a deeper talent pool. Startups with limited resources "are usually going to get the top people in slightly unexpected places. They're going to have to be creative and mine pockets of employees other people haven't considered," Warner says. "One of these [pockets] is recent immigrants. People with a little bit of a language problem or [who are] unfamiliar with the United States may nevertheless be terrific workers." However, ask if they have a legal right to work in the United States. Offering internships is another way to attract potential hires.
53. Know how to interview people. It's easy for conversations to turn personal, especially if the applicant is a friend of a friend. But asking an applicant if they're married, if they have kids or even when they graduated from high school are all illegal questions. Also keep in mind that we live in a world full of nondisclosure and noncompete agreements, so make sure to ask potential employees if they're restricted in any way. Articles located at http://jobsearchtech.about.com/od/interview/l/aa022403.htm and www.resumagic.com/interviews_illegalquestions.html offer handy tips for asking the right questions.
54. Orient and motivate. The employees you hire will never be able to read your mind, so be a very good communicator regarding training, job expectations, company goals, scheduling and pay from the start. Review job performance every three months, and consider a raise every six months. Ask employees what kinds of projects inspire them. The more commodity-driven your business, the more important even the smallest motivators will be to keep turnover low.
Continue learning: For more information on hiring the best employees, read our hiring how-to . For the nitty-gritty on all those regulations you need to be aware of, visit our Employment Law section .