By Steve Shechter, Guest Writer
The success of your business, whether it’s a one-truck operation or a multi-truck enterprise, depends on a lot of hard work and ingenuity. However, no matter how hard you work or how good business is, one disaster can wipe out all your profits and even destroy your business. The key to making sure that all the effort and money you’ve invested in your business doesn’t disappear when a disaster strikes is to protect it with the appropriate insurance.
Whether you’re just starting out, or you’re a veteran, there’s one thing you can be certain about in the mobile tool business — you need insurance. The proper amount and type of insurance is critical to protect your business, yourself and your family. But did you know that your insurance needs can change over time?
New Business Owner
You’ve just bought your truck and loaded it with inventory. You’re passionate and excited to get out and meet with all your new customers to tell them about the latest and greatest new tools. But don’t be too quick to sink all your assets into your new business endeavor, especially if you have dependents.
Take steps early on to protect your personal assets, as you increase the asset base of your business. As you start out, you should think of insurance as one of your strategic assets, not unlike your tool truck. Also, it’s important to understand the difference between equity and debt. Equity is the money that you or someone else puts into the business in return for an ownership stake. Debt is money you borrow to put into the business, which you’ll have to pay back with interest.
The Growing Company
You’ve been in the business for quite a while and think you’ve got all of your bases covered. Sales are strong, debt is under control, inventory turns enough times each year and profits are consistent. At this stage, you’ve made a lot of good decisions that have put you among the 44% of small businesses that have made it to four years in operation.* You are consistently focusing on your customer, innovation, marketing and new products. The pace at which your business grows depends on you and the marketplace. At this stage, you may find you need additional coverage to protect your business against the increased risk that comes with growth.
Be sure you know what coverages your clients, investors or creditors require. Some might insist on higher limits than you might choose on your own. But mostly, be certain that you have protected yourself adequately against unforeseen losses. (Note, it can be very dangerous to make insurance decisions entirely on what a third-party requires.) Talk over some of these points with your insurance agent and be certain you are sufficiently covered, whether you’re just starting out or well established.
*U.S. Small Business Administration and Monthly Labor Review, May 2005
The information in this column is not intended to be a substitute for qualified legal or tax advice.
Steve Shechter is the president of Evans Insurance Agency in Akron, OH. He can be reached at [email protected] or (330) 535-8157.