Business insurance is something that many fledgeling enterprises see as an extravagance. With cash flow being such a priority in the early weeks and months, it can be difficult to justify the extra outlay.
But small businesses are vulnerable to a whole range of different kinds of risk, any of which in isolation might make the case for insurance that much more compelling. Let’s take a look at some of those risks, and the signs that it might be time to make the investment in specialised business insurance.
Risks Faced By Small Business
Risk to business comes in several forms.
Economic risk covers broader fluctuations in the wider economy. If the sea on which you’re sailing becomes suddenly choppy, then you’ll stand a greater chance of running aground. You might mitigate this through reigning in spending during times of uncertainty, and thereby keeping a cash reserve aside for emergencies.
Compliance risk covers legal matters. You’ll need to stay on the right side of the law, or risk penalties. We should also think about the damage that a dissatisfied customer might do to your reputation, especially in an age where bad news can spread rapidly over social media.
Why Might I Need Insurance?
Certain milestones in the growth of the business might point to a need for specialised insurance. Let’s consider a few of them.
If you’ve done a good job in managing the business, then it might be bringing in more money. This means that you stand to lose more in the event that things take a dip. Your insurance should match the earnings potential of your business. So, if you’re unable to operate for a period of time, you’ll be covered for the appropriate amount of losses.
Many small businesses start life as one-person operations. But over time, as the business expands, new staff need to be taken on. The introduction of new staff generates a new kind of risk, as it makes you reliant on other people. Moreover, workplace accidents and other problems might leave you vulnerable to being short-staffed, or even prosecuted.
If you’ve invested heavily in new equipment, then your level of risk increases substantially. This is especially so if you rapidly become dependent on that new equipment. For example, if you’ve got a new computer system in place which allows you to process ten times as many orders, and that computer system subsequently breaks down, then you’ll find that your operating capacity is rapidly slashed. This can lead to a direct loss of income, naturally, but it can also lead to reputational damage – as your customers may come to doubt that they can rely on you, and they may be more reluctant to recommend your business to a friend.
This applies to heavy machinery like industrial printers and CNC equipment, but it also applies to any vehicles you’re buying. Vehicles driven on British roads must be insured by law, but if you’re expanding your fleet, it’s worth looking at specialised insurance.