Take These 7 Steps Right Now to Protect Your Small Business
Whether you’re just starting your new business, or your company has been up and running for a while, protecting the business you have worked so hard to build is essential. However, in the rush of launching a startup and the day-to-day challenges it entails, many entrepreneurs neglect this step. Here are seven things you can do to protect your business.
1. Select the right business structure
If you own a one-person business, by default you’re a sole proprietorship. Many startups stick with this business structure because it’s easy (you don’t have to do anything), but that’s not always the smart choice. The biggest risk of the sole proprietorship structure: It doesn’t protect your personal assets, so if a customer gets angry and sues you, you could lose your savings, your home and any other assets you have. For many businesses, especially those with plans to grow or raise capital from banks or investors, an S or C corporation or limited liability company (LLC) is the better choice.
2. Get legal help
Rocket Lawyer, Nolo and LegalZoom are among the many legal websites that help you DIY. Read about legal issues, get templates you can customize to make your own contracts, and more. But while these sites are useful, sometimes you need a real, live attorney. To prepare for that eventuality, talk to other entrepreneurs and colleagues to see if they can recommend attorneys who are familiar with small business issues. Take the time to compare attorneys by scheduling an interview with each before you hire them. Most small businesses are on tight budgets; if this is you, talk to the lawyer about payment options that may be more affordable for your needs.
3. Get an accountant
Whether you intend to do your own business bookkeeping or not, a good accountant is worth the cost. Do you have time to keep up to date on tax law changes? Of course you don’t, but your accountant does. Accountants can help you with tax preparation to save you money on taxes, advise you on the best legal form of business to choose, suggest the best ways to pay yourself, and even help with your personal finance needs. In the startup stages, an accountant can help you assess your startup costs, tell you if your financial projections are realistic or not, and help you get together all the information you need for a presentation that will persuade bankers and investors you deserve their money.
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4. Get business insurance
In addition to general liability insurance, your business may also need professional liability insurance, sometimes called errors and omissions (E&O) if you provide professional services such as consulting or accounting. Your state may require you to get workers’ compensation insurance if you have employees. In addition to these basics, it’s also wise to consider key man life insurance on you and other key employees or partners, cyber-insurance in case of a cyberattack or data breach, and business interruption insurance to provide you with some income if your business is temporarily closed due to a disaster. Look for an insurance agent experienced in your industry and small business who can help you craft the right combination of coverage.
5. Vet your new customers
When B2B customers don’t pay or pay late, it can leave your company in a cash flow crunch. Plus, you’ll spend time and effort trying to get the invoice paid. To avoid this pain, always do a thorough credit check before you begin working with a new B2B customer. You can run credit checks on customers at Experian, Dun & Bradstreet, or Equifax; while there is a cost, it’s a small price to pay to protect yourself. If you still want to work with a customer whose credit is less than stellar, you can adjust their terms accordingly, such as asking for partial payment up front or c.o.d.
6. Protect your people
Disaster—both natural and man-made—can strike your small business at any time. Unfortunately, many small businesses never recover because they aren’t adequately protected. In addition to insurance, you also need a disaster plan that spells out what you will do in case of an emergency affecting your business. Your plan should cover things like how to minimize risks from disasters, how to get employees and customers out of your location safely, and how to keep your business up and running after a disaster. The SBA has guidelines that can help you develop an emergency business disaster plan.
7. Protect your business data
Big companies aren’t the only ones at risk from cyberattacks. In fact, small businesses are tempting targets for hackers since they often fail to take basic cybersecurity measures. Protect your business by backing up your data using a secure, cloud-based solution. This keeps your data safely off-site where it can’t be destroyed by a fire or flood. Then gear up with business-grade computers and antivirus software and install firewalls. Last but not least, train your employees in secure computing tactics such as using strong passwords. Learn more about best practices for small business cybersecurity.
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