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What Kind of Business Insurance Do You Need?

By Caron_Beesley, Contributor
Published: November 5, 2014

Business insurance is one of those gray areas. Do you need it or don’t you, and, if so, what kind? For certain businesses – for example, amusement parks and health care related industries – it’s an absolute necessity from the get-go, but what if you run a freelance business or engage in low-risk work? Is business insurance a requirement?

While it may not seem so from the outset, as your business grows and takes on additional risk, business insurance quickly becomes a must. The problem is that many smaller businesses ignore the issue of insurance until it’s too late.

One reason for this is that many small businesses often assume that by forming a Limited Liability Company (LLC), they’ll be afforded protection in the event of a lawsuit. However, while this structure can protect you from personal liability for business decisions or actions of the LLC – the liability protection is limited.

For example, if you inadvertently break intellectual property laws or are sued by an employee, you could face a lawsuit and potential losses that being an LLC cannot protect you against.

Of course, LLCs aren’t the only business structure that can benefit from business insurance. Sole proprietors, partnerships, S-Corps and Corporations all need insurance.

But what kind of insurance do you need? Here are four forms of coverage that you should consider (over and above healthcare insurance and any employer insurance obligations):

General Liability Insurance – This is the silver bullet for protecting you, your business and your employees from any damages incurred as the result of bodily injury, property damage, medical expenses, libel, slander, the cost of defending lawsuits, and settlement bonds or judgments required during an appeal procedure.

General liability insurance is often sold as a catch-all and includes numerous add-ons that you can tailor to your business and its degree of risk. For example, if non-paying clients are a concern, you can add accounts receivable protection to your policy. Inland marine coverage is another option that can protect against loss or damage to business property when it’s not on your premises.

It’s also worth noting that oftentimes a client will request evidence of your certificate of general liability before doing business with you – another good reason to secure a policy before it holds up any potential new work.

Property Insurance – Whether you own commercial real estate or run a home-based business, protect your assets and the equipment, fixtures and furniture inside it. Property insurance is often rolled into general liability insurance, check with your broker to be sure. Home business owners should also be aware that home insurance doesn’t always cover home-based business losses. You may need to add additional riders to your home insurance policy or get other insurance to cover additional risk.

Professional Liability Insurance – Also known as errors and omissions insurance, this insurance protects against errors, malpractice and negligence in the provision of services to your customers. This is often recommended to businesses who provide services such as tax or financial advice, as well as physicians (who are often required by state law to carry this insurance). 

Product Insurance – This protects businesses that manufacture, distribute and retail products against any financial loss incurred as a result of a defect product that causes harm or injury. Product insurance can also be tagged on to a general business liability insurance policy.

The Bottom Line

Insurance can be a confusing business. A good insurance broker can help demystify this process and put together a package based on your unique needs. Once in place, don’t forget to keep your policies current and under review (for example, if you take on employees or new assets).

Check out SBA’s Business Insurance Guide for more information and some useful tips on buying insurance.

Disclaimer: The information in this blog does not constitute legal advice. Seek the services of a lawyer if you have any questions about business liability.

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

5 Ways To Prepare for Small Business Saturday

By Caron_Beesley, Contributor
Published: October 29, 2014

November 29th is Small Business Saturday! That’s right, the day after Black Friday and before Cyber Monday is your chance to make a lasting impact in your community by encouraging shoppers to shop local.

But just how big an impact does the day have? According to research by American Express and the National Federation of Independent Business, consumers who were aware of Small Business Saturday in 2013 spent $5.7 billion with independent merchants (a four percent increase over the previous year).

It also gained attention at the highest levels. President Obama championed the day and 41 state governors issued proclamations in support of the campaign.

Small Business Saturday is fast becoming a holiday tradition, and it’s an especially powerful opportunity for brick-and-mortar retailers to boost holiday sales. Here are five steps you can take to make November 29th a big day for your small business.

Incorporate Small Business Saturday into Your Bigger Holiday Marketing Campaign

Make a point of including Small Business Saturday in your plans for the season. Think of your goals and how the day can help you. It could be as straightforward as using the day to increase awareness of your business or grow your email list by encouraging folks who stop by your store to sign up for special offers and news.

Your goals will help drive your tactics, so spend some time scoping these out.

Create a Special Offer

This is a great day to rally your customers and attract new ones by enticing them with special offers like a one-day, time-bound coupon or a free sample. Whatever you do, go above and beyond to make your customers feel special and give them a compelling reason to keep coming back through the holidays and beyond. If you do business online, make sure your offer can be redeemed via e-commerce as well.

Market Your Business with Free “Shop Small®” ResourcesShop Small image

American Express, who founded Small Business Saturday in 2010, offers a number of free marketing materials to help your ride the wave of participation and promote your involvement. These can be easily customized for your own business and include printable signage, free online ads, sample email templates and social posts and Shop Small logos. If you’re an American Express merchant, then you can also use the Shop Small map to make it easy for people to discover and locate your business.

Rally Your Neighborhood

Could your business become a neighborhood champion of Small Business Saturday? Why not host a pancake breakfast kick-off with your business neighbors? Or get your community out for a fun run in support of shopping small.

To help you promote your event, take advantage of the Small Business Saturday Event Kit that includes welcome mats, shopping bags and more! You can also explore ideas for events here.

Learn from Businesses That Previously Took Part

Need some inspiration? Read the stories of businesses who used Shop Small® marketing materials to support their participation last year.

For example, Little Man Ice, a Denver-based ice cream shop, boosted its sales by working with other businesses in their neighborhood to market the day on social media and display personalized signage in their window. They also let neighbors know their location by putting it on the Shop Small map.

Children’s fashion boutique, Pippen Lane, achieved a 20 percent increase in sales that day by organizing an event to attract customers on the day and promoting it using Shop Small email templates and social posts.

Resources

Check out SBA’s Small Business Saturday site for more information and resources.

Related Articles

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Profitable and Out of Business

By Tim Berry, Guest Blogger
Published: October 28, 2014 Updated: October 28, 2014

Having cash on hand is critical to staying afloat. In fact, profitable companies go broke because they had all their money tied up in assets and couldn’t pay their expenses. Working capital is critical to business health. Unfortunately, we don’t see the cash implications as clearly as we should, which is one of the best reasons for proper business planning. We have to manage cash, as well as profits.

A simple example

One of the best ways to understand the cash vs. profits dilemma is to follow an otherwise-profitable company going broke because it can’t meet its obligations. Let’s do it with numbers, simple bookkeeping.

In the beginning

Start with $100 as startup capital. In finance and accounting, assets must always be equal to capital plus liabilities, so our initial balance sheet (not shown) would have assets of $100—the money—and capital of $100.

Sell a Widget

We buy a widget for $100 and sell it for $150. The simple bookkeeping illustration here below shows what happens. We have $50 profit in the income statement on the left, also called profit and loss. The balance sheet on the right shows we now have the same $100 in original capital plus $50 in earnings, which are equal to the $150 you have in cash as an asset.

Image of spreadsheet

Sell More Widgets

Buy another widget for $100 and sell it again for $150, and you have $200 in the bank. Do it again, you have $250 in the bank. Your income statement shows sales of $450, cost of sales of $300, and profit of $150. The illustration shows your income statement and balance sheet at this point.

image of spreadsheet

But What If You Sell to Businesses?

Now go back a step and make the situation more realistic. For example, most sales of products to businesses go on terms, with the money due in 30/60/90 days. So if you sold that widget on credit you don’t have $150 in the bank. You still have $50 in your bottom line, but now you have nothing in the bank. Instead, a customer owes you $150, which is what we call “Accounts Receivable.”

image of spreadsheet

Notice above that the bank balance is zero. We’re profitable, but there’s no money in our bank account. That’s a worry.

Buying on Terms

Knowing we can buy a widget for $100 and sell it for $150, we get our widget supplier to sell to us on the same terms we sell, net 30, instead of for cash. Now we have $100 that we owe to suppliers, which is called “Accounts Payable.” We also have $100 worth of widgets in inventory. This gives you the case in the following illustration in which we are now poised to sell another widget and make more profit.

image of spreadsheet

And Here’s the Key Problem

Take the situation above – profitable but no money – and add in an unhappy supplier. The widget vendor forecloses on its $100 debt.

And now, add in your own real-world experience in business. Add in the pressure of payroll, rent and all those other expenses that have to be paid. The business that gets stuck in this vice has some very unhappy owners.

Don’t get caught in this trap. Plan for working capital.

Conclusion: you need working capital.

In business, the example above is completely unrealistic. Where are the operating expenses, such as rent, salaries, telephones, or even advertising for those widgets? What supplier would give us a widget on credit when we have no history and no assets? What bank would loan us money in this situation? Banks do loan against inventory and receivables, but only to a certain percentage of total value. What was missing here, all along, was working capital.

Important: In strict accounting terms, working capital is equal to short-term assets minus short-term liabilities. In real terms, working capital is the glue that holds your cash flow together. Get it into the bank before you need it, or you won’t survive the unexpected.

About the Author:

Tim Berry
Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

8 Ways to Boost Sales of Your Small Business Services

By Caron_Beesley, Contributor
Published: October 22, 2014 Updated: June 24, 2016

Struggling to differentiate your businesses’ services against the competition? Hoping to close more sales, but not sure how to do so with your limited resources? Here are eight surefire ways to increase your small business sales.

Narrow Your Target Market

Focus in business is everything, but doing so is often hard for small businesses owners who worry that narrowing down their target market will leave them with very few customers left to go after. But going after a specific slice of the market is a great way to get customers to notice you among the fray of companies competing for their business.

The easiest way to do this is to…

Become an Expert in your Market

Being an expert in your field brings credibility, business and referrals. But you’ve got to work at it. It takes more than simply listing your credentials on your website; you need to be out there positioning yourself as a trusted advisor.

This happens all the time around you. Small business owners are writing blogs, hosting free workshops, and giving away white papers and newsletters – all great channels for sharing information with your target market and positioning yourself as a credible expert in your field.

Here are a few tips to help you position yourself as an expert:

Rank Your Targets

Another way to zero in on your target market is to rank prospects according to profitability. Anyone can do this, from accounting firms to freelancers. Take a look at your client base – which are the most profitable for you? This will help weed out those whose work you really don’t need and those it makes sense to pursue.

Alongside profitability, identify the client profiles that have proven to be your most satisfied. These are the ones who are referring your business to friends and neighbors. Do they represent a particular demographic or live in a certain neighborhood? Perhaps they have a common challenge or need that can help you fine tune your sales focus.

This is market research at its simplest. And it works.

Showcase Your Differentiators

Now let’s add a little introspection to the mix. What makes you different? Understanding and communicating this can really boost sales, and shift the focus away from price alone. Here’s an entire blog on just this topic: 5 Tips for Using Differentiators to Increase Your Small Business Sales.

Fit Your Messaging to Suit your Targets

Once you’ve identified your target and nailed you differentiators, review your messaging and marketing programs to make sure you’re touching the right customers with a relevant message. You might also need to consider your company name and branding to ensure it hits home and reflects your niche.

For more tips on getting your message right in the context of your target market, read 7 Tips for Getting Your Marketing Message Right.

Sell More to Existing Customers

Here’s another exercise that can ride on the coattails of your customer ranking research. Once you’ve identified your loyal and top-spending customers, think of ways to offer them more.

It’s not as perplexing as it sounds. It can be as easy as setting up a loyalty or VIP program that offers incentives such as promotions, early access to new products and services, rewards points, etc.

This form of customer appreciation is great for keeping you top of mind, driving repeat business, and referrals.

Have a Plan for Each Stage of the Sales Cycle

Does your business have a marketing action plan? Do you know how to deal with aware prospects versus interested prospects? Every stage of the buying cycle is different and deserves a marketing plan all of its own so that you are ready and prepared to nurture those leads further, until you close a sale, and push for referrals.

For ideas on what your action steps should look like, read Rieva Lesonsky’s post: Creating a Marketing Action Plan.

Optimize the Conversion Process

So you have an interested prospect? Make sure your sales and marketing teams have the tools they need to close the deal. Marketing automation software can really help with this process, but it’s not an absolute must. As mentioned above, start by creating a marketing plan that addresses each phase of the sales cycle – awareness, interest, engagement and sale.

Then think about the timeline that accompanies a typical sale and ways you can match your outreach efforts to keep warming your lead. For example, use your blog or a workshop to generate awareness and earn trust. Then, use social media and your website to encourage prospects to sign up to your email list with the promise of more information and/or special offers.

Now that you have an email address and basic information about a prospect, tailor a personalized marketing outreach campaign to them. Send staggered emails (once a week) and offer more information. Invite them to check back in for a demo, webinar, or other “learning” experience.

If they still aren’t ready to convert, consider mailing them an offer or promotion and follow-up with a sales call.

All through this process, you are deepening your relationship with the prospect by offering value – not just chasing a quick sale. This type of “guided selling” can really help improve your conversions dramatically.

Good luck!

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

National Cyber Security Awareness Month

By Davidh, SBA Official
Published: October 16, 2014 Updated: October 23, 2014

Note: This blog is co-authored by Jerome Nash, Information Technology Specialist at SBA

“Cybersecurity is a shared responsibility”

With the rapid and amazing development of computer and communications technology, the Web has become the main stage where most of the world’s events seem to take place … and computers rule. From seemingly pedestrian activities such as online games, to fulfilling basic tasks such as shopping, to the more enhanced Department of Defense guiding a drone to launch an attack, cyberspace is where everything happens and thus the most vulnerable element in our daily lives.

Some pundits have “prophesized” that the next big war will be waged in cyberspace. In fact, they may be late, as there is a huge “war” going on right now with rogue individuals and countries trying to get access to our most vital information, be it through the so-called personal identity theft, to digging out our closest guarded military secrets with the intention of harming our national security.

As the Department of Homeland Security has stated, “The Internet is part of everyone’s life, every day. We use the Internet at work, home, for enjoyment, and to connect with those close to us. However, being constantly connected brings increased risk of theft, fraud, and abuse. No country, industry, community, or individual is immune to cyber risks. As a nation, we face constant cyber threats against our critical infrastructure and economy. … cybersecurity is one of our country’s most important national security priorities, and we each have a role to play—cybersecurity is a shared responsibility.”

October is the eleventh anniversary of National Cyber Security Awareness Month, sponsored by the Department of Homeland Security, in cooperation with the National Cyber Security Alliance and the Multi-State Information Sharing and Analysis Center. (Click here for more information http://www.dhs.gov/national-cyber-security-awareness-month.)

Through a series of events and initiatives across the country, organizers engage public and private sector partners to raise awareness and educate Americans about cyber security.

This 11th anniversary, the initiative looks ahead to the cyber security challenges for the next ten years, dedicating each week of the month to a different cyber security issue:

Week Two: October 6-10. Secure Development of IT Products.  Building security into information technology products is key to enhancing cybersecurity.

Week Three: October 13-17. Critical Infrastructure and the Internet of Things.  Looking at the importance of protecting critical infrastructure and properly securing all devices, including household items that are connected to the Internet.

Week Four: October 20-24. Cybersecurity for Small and Medium-Sized Businesses and Entrepreneurs. Showcasing what emerging and established businesses can do to protect their organization, customers, and employees.

Week Five: October 27-31. Cyber Crime and Law Enforcement.  Working with law enforcement to combat cyber-crime and educate the public on how to protect themselves from online crime.

In addition, the SBA is offering a free online course to help small business owners protect their business information online. Cyber Security for Small Businesses will help businesses to learn how to avoid breaches in data, measure their vulnerabilities, and what best practices to use to protect their business and your customer information.

The events listed above, are part of a widespread effort to raise awareness about the growing importance of cybersecurity. To access a complete list of related events, visit http://www.staysafeonline.org/ncsam/events.

About the Author:

David J. Hall

SBA Official

Hi, my name is David and I'm serving as a Moderator for the SBA Community. Our goal is to continually improve this site to meet your needs, so we appreciate your feedback and participation.

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