Risk Management is not always at the top of the priority list when an entrepreneur is developing their next start up. Failure to effectively plan for the risks a business might face can spell failure for many new businesses. How you will handle the hiring and firing of employees, developing effective safety programs and purchasing the right amount of insurance coverage are all extremely important for the success of any start-up. Here are six tips to prepare your new start-up for the risks it may face.
Hiring the right employees
Hiring the right candidate is crucially important to the success of any start up. The right candidate is many times not necessarily the best candidate. There are many things that go into making who you hire the right choice for your organization at any particular time. If for instance you are hiring for the marketing department and you have two employees in that department who are great writers, but not very technologically advanced it does not make a lot of sense to hire another writer. Finding the right mix is what is best for your organization. This can lead to happier employees who intern generate better results for your business.
Safety Programs
No matter what type of industry you are operating in, safety programs have to be a part of the business plan. These programs should be an ingrained part of your company culture. Making them part of this culture starts with your onboarding process for new employees. If they know from day one that the safety of the employee is important to everyone in the business they will take safety more seriously. Aside from being the right thing to do, safety programs can save your business a lot of money. They do take a lot of time and effort up front, but they can save your business immensely in less injured employees. Healthy employees are happy employees and effective safety programs keep your employees healthy. This will save your business in lost work, medical costs and premium on commercial insurance. The next time you go to milling through workers compensation quotes you will see the lower rates on premium and can know that your safety programs are working.d
Finding the right customers
Many businesses, especially in the beginning, are so hungry for business they take on any client. This can help get the business established. It can be a great way to get the cash flow running for your business, but getting too many of the wrong customers can be detrimental to your business long term. The saying, ‘the customer is always right’ is only partially true. That saying should more accurately be worded, ‘Successful businesses always make the customer feel like they are always right’. This is because, there are certainly many situations in which the customer is not right. If someone stills from you and then tries to return the product, they are not right. If a person does not purchase an extended warranty on an electronic device and they want a return 2 years down the road, they are not right. If your business has too many of these situations, it will cut in to the bottom line of the business. At some point in time, a successful business owner has to know when to cut a customer loose. Many times this is because their expectations do not match the products or services you are providing. In this case it frequently is best to just move on to a new customer. How a business owner manages these situations will go a long way towards success and failure as a start-up. The more preparation and planning you make for just these types of situations the better prepared you and your employees will be when they arise.
Cyber security
It seems like every few months a major nationwide company experiences a data breach, but the problem is not just a big business problem. Two of the largest data breaches in history, Target and Home Depot, were first started by small businesses first getting hacked. Hackers now look to hack a smaller business and they may not even do anything with the access immediately. Only when the small business has some type of partnership with a larger entity that has access to a larger amount of public information will the criminals take advantage of the access. Hackers gained access to Target through an HVAC Contractor who had access to their internal computer systems. Home Depot was accessed by the company that processed the credit and debit card transactions at their self-checkout stations.
Insurance
Commercial Insurance is not usually on the top of an entrepreneur’s mind when they are planning a new start-up, but failure to properly protect your cherished investment can cause its ultimate demise. In most states workers’ compensation and general liability coverage are required by all for nearly all businesses, but that is just the bare minimum coverage. Most businesses need several other policies in addition to truly protect their business. Those coverages can include commercial auto, commercial property, professional liability, cyber liability or even liquor liability. Partnering with an independent insurance agent with whom you trust can help you determine what types of coverage you need and to what limits.
Non-compete clauses
Non-compete Clauses are something you should consider having in place for both your employees and your customers. Employees are probably your most valuable asset and training them is very expensive. The last thing you want is to constantly have your employees getting training and experience under the guidance of your company to turn around and use that knowledge with your competitor. Having all employees sign a non-competition agreement is a good way to prevent this. Even if these employees do go to work for a competitor it will cost you lawyers’ fees and court costs to enforce it, but it is still there as a deterrent.
Non-compete clauses are not just for employees. Depending upon the industry you are in, you may have employees who are 1099 independent contractors working for you. In many instances these employees have more contact with the customer than you do. A dishonest customer may propose to that contractor that they just pay them directly and both can benefit from the transaction. Having some type of clause in your contract that if they hire away your employees to do the same work they owe you 90 days’ worth of work or some other type of payment to help you hire and train their replacement.
