Business Protection Bulletin

Now and then, we need to take a look at our industries and ask ourselves what the landscape is going to look like in five more years. Business protection can protect us against unforeseeable losses, but it’s not much help when there’s no business left to protect. Recent developments like 3D printing, the Internet of Things and Web 2.0-enabled innovations mean that more industries than not are changing shape. Whether your industry is dying, or simply suffering from a shrinking market, it’s worth planning for that future. You have a few options for adjusting to an industry whose future does not look bright.

Going Niche

If you look at the market for coffee right now, whole bean sales make up around a tenth of all sales, and that number is shrinking. This is in part thanks to coffee pods, which most people simply find more convenient than grinding and brewing their own coffee. Single-serving coffee doesn’t taste as good and doesn’t give you many choices for how you’d like to brew it if you prefer Turkish coffee or you boil it cowboy style or make your own espresso, but the average consumer simply doesn’t care.

This sounds like bad news for coffee bean sellers, certainly, but, people who like to grind their own coffee will always exist. We’re seeing a mass market becoming niche, and to the right entrepreneur, that is a golden opportunity. Customers in niche markets are willing to pay a premium price, and they spend a lot more time talking about their favorite products than do casual users who are looking only for convenience.

Diversifying

Expanding your brand into related or even unrelated industries can help you to maintain what you’ve built and use it to give you some momentum as you explore other avenues. Off the top of your head, you can probably name a dozen superheroes, but when was the last time you visited a comic book shop? A brand is more than its product. If movies ever suffer the same decline in popularity as comic books have, then Marvel will put more attention into producing television and video games. If you run a successful business, it’s because the market has put some faith into you. Will your customers follow you into another field?

Selling Out

Finally, you can simply sign the business over to the top bidder. There’s really no shame in selling a business if you’ve decided that you’d rather simply cut and run and build something new rather than try to make it work in an industry that isn’t likely to bounce back any time soon.
Source http://www.bloomberg.com/news/articles/2015-04-15/the-coffee-revolution-is-just-too-efficient-for-hurting-farmers

A “company” is sort of a weird concept, isn’t it? On the one hand, a company is just a name, a brand that has earned some trust with the public. If Coca-Cola lost all of its funding and all of its bottling plants right now, they could hand the name and the secret recipe over to anyone with a basic working knowledge of business, and the new guy would be making millions of dollars within a week, whether that means selling the concept to Pepsi, or brewing it up at home and selling it on the Internet. On the other hand, your company is also the people who work for you, the building in which you conduct business, the phones, the computers, the furniture, the company cars, and more abstract but still very real resources like money, time, energy and staff morale.

What we’re saying is simply that something as complex as a business presents a lot of vulnerabilities, a lot of risk. We might not always think to cover those risks, we might not even know that those risks exist, and that’s why we put together this list of things you might not think to cover, but should:

Commercial Auto Insurance

Easy question here: Do you use own a personal car that you use for business? We mean more than just driving to and from work. Do you ever deliver items in your car? Do you let employees take your car to make bank drops or to pick up supplies? In business, we’re often working with somewhat fluid definition of what’s what. You may come to a point where your personal auto insurance policy isn’t going to get you everything you need should something happen to a vehicle that has transitioned into being a commercial auto. It may be wise to see if you can cover your personal car under your business policy.

Product Liability

Even if you don’t manufacture physical products, if someone decided to sue you over bugs found in your app, it wouldn’t be the first time that had ever happened to anyone. Through your own fault or the user’s, you can never be 100% certain what’s going to happen when someone uses your product for the first (or hundredth) time. Better to cover yourself, and your customers, than face a scandal and a lawsuit.

Data Breach

Bad news: You can’t really copyright an app. Sure, you have a means of recourse if someone steals your code and releases it themselves… Unless they change the app’s name and make sure nobody finds out they stole code directly from you. Good news: Data breach insurance will make sure that you’re covered anyways.

Business protection insurance is great, but let’s be honest: insurance is a safety net. Business protection insurance protects the business as a whole by making it easier to recover from a loss, but it only helps you to recover, it won’t stop bad things from happening, it’s not magic, so you need to protect your business in ways other than simply taking out a robust policy. Here are a few points that can help you to reduce the chances that you will have to cash in your policy sooner than you’d like:

Make Safety a Priority

Whether you’re running a construction site or an office, accidents can happen. It’s a good idea to run regular safety checks, make sure your outlets and other utilities are working properly, ensure that you have first-aid kits on hand and that everyone knows where they are, keep a clean house, run fire drills, keep your exits clear, and don’t overwork your employees.

Keep your Software Up to Date

It’s common sense that you need to keep your computer systems secure with the right software, but you should also make sure to keep your operating systems and other software up to date, along with your security software. Outdated software tends to be more vulnerable to cyber-attacks, and you don’t want a system crash costing you a week’s worth of work.

Take Physical Security Into Account

No matter how hard you work to keep your computer system secure, it’s not going to stop someone from throwing a brick through the window and stealing thousands of dollars worth of equipment. Cyber security isn’t the only kind of security that matters. Security guard services, better lighting or moving to a safer location when it’s in the budget can all help to keep your business safe.

Practice Regular Maintenance

Have your server room cleaned every six months or so, do regular tune ups on your A/C units and company vehicles, make sure that things are running smoothly. A broken air conditioner probably isn’t going to bankrupt your business, but it’s going to cost you some money and it’s going to be a hassle to repair or replace.

Prepare for Natural Disaster

Study up on how to protect your business from natural disaster at Fema.gov. You may be covered against flood and fire, but wouldn’t you rather not have to take several months out of doing business while you rebuild your offices from the ground up?

The more your business grows, the more you have at risk should something go wrong. You may have been advised to go ahead and cover every new development as it comes up. Obviously if you’ve just bought a new company car, you’ll want to see how to get that covered under your policy. If you’ve just added your first physical product to your store, then you need to look at insurance to cover physical goods and shipping. Sometimes, however, new risks creep up on us.

This is why we recommend an annual review of your insurance policy and what you need covered. If you want to add a checkup every six months to that program, all the better, but at the very least you should take a day out once a year to make sure that no new liabilities, risks and vulnerabilities have snuck up on you. Here’s what you’ll want to consider:

• Directors and Officers Liability. This type of insurance will cover you if someone in management winds up being sued for their conduct. You may trust your top brass, but can you be absolutely certain you’re never going to, say, bring on a temp or an intern who misreads their intentions?
• High-Risk Customers. Have you recently branched out into a new area of business, a new product, a new demographic? Some clients and customers bring a higher risk, and demand greater coverage than others.
• Employment Practices Liability. Has your turnover rate increased this year? If you wind up needing to fire someone, it’ll be nice to know you’re covered if they decide to call a lawyer about it.
• Travel. Travel-related liabilities really do sneak up on you. You may not notice that you’ve had your people driving twice as many miles this year as last, but it compounds quickly. You may be able to save some money by covering rental cars and other travel related risks under your business policy.
• Property Values. Having a successful new business in the area does wonders for property values. Make sure that you’re insured for what your office is actually worth, not just what it was worth when you moved in.

Once a year, you should map out your assets, your resources, your risks, your customer demographics, everything that makes your business what it is, everyone who might sue you, everything that might break, everyone who might quit, and make sure that you have a safety net should something go awry.

When discussing an employee’s wellbeing, it’s easy to fall into the trap of saying “I pay them a fair wage, don’t I? This is an office, not a dayspa!”

In today’s increasingly complex and litigious business environment, your corporate officers and board of directors – the brains of the company – need protection against personal financial liability arising from their corporate activities.

These people are highly vulnerable to lawsuits by investors, employees, vendors, competitors, customers, regulators and others, alleging misconduct for a wide variety of activities, such as:

• Providing inaccurate or unlawful advice.
• Fraud and malfeasance.
• Misrepresentation of company assets.
• Failure to comply with workplace laws.
• Poor hiring decisions. (A Towers Perrin survey found that 40% of all reported D&O claims involved flawed employment practices.)

Directors & Officers Liability (D&O) Insurance will pick up the tab for legal fees, settlements, and other expenses from such litigation. This gives your officers and directors financial peace of mind in carrying out their corporate activities, and provides a valuable incentive for attracting, and keeping quality people who can help grow your business.

There’s a widespread need for this coverage. One in six company executives (17%) surveyed by Inc. Magazine believe that their business will experience a D&O-related loss within the next year.

These policies usually offer two types of coverage known as “sides.” Side A protects directors and officers from personal financial liability if the company is unable to indemnify them. (For example, during a bankruptcy or dissolution.) Side B coverage reimburses the company if it indemnifies directors and officers. (For example, when shareholders file suit against them.) A third coverage – sometimes known as Side C – comes into play when both the company and individual officers and directors face lawsuits.

To learn more about how D&O Insurance can help minimize the financial risks of litigation for your company and your top people, feel free to get in touch with us at any time.