Written on June 24, 2010 at 12:06 pm, by Steve Strauss
The disaster in the Gulf is hard for all of us to watch, and from a business perspective, it is doubly troubling to see all of these energetic entrepreneurs being put out of business. What would you do in that situation? It’s like the old Clash song –
Should I stay or should I go?
If I go there will be trouble
If I stay, there will be double
No one likes to learn a lesson at the expense of others, but as I watch the fishermen, restaurateurs, and everyone else down the business chain struggle to stay afloat, it occurred to me that we would be remiss if the lessons from their crisis were lost on the rest of us.
The most important of these is that it is our job as entrepreneurs to reduce the risk inherent in owning and running your own business to the extent possible. Sure risk is part of our gig; that is a given. In fact, for many small business people, some risk is part of the fun of the whole thing. It’s the juice.
But it is the wise entrepreneur who looks at risk as something to be managed, and something to be engaged with prudently. Wild, crazy risks are usually for business neophytes.
So, how do you reduce your risk? Here are a few ways:
Be adequately insured: I am not sure that there is a more boring business topic than business insurance, but that’s the way it goes. Unexpected things happen. Oil rigs blow up. Crooks break into businesses. People slip and fall. Having adequate insurance means that none of these sorts of things will put you out of business.
Nothing boring about that, right?
Incorporate: I am always amazed at how many small businesses are run either as a sole proprietorship or a general partnership. The problem with either of these is that, legally speaking, you and your business are one in the same. If something bad happens at the shop, you and your personal assets are on the hook.
But by creating a corporation for your business you are setting up a separate legal entity. If something goes wrong in that case, it is the corporation, and not you, that is on the hook. That is better.
Have some policies: A set of written policies for you and your staff does two things:
1. First, it is some insurance that things will be done properly, because everyone will know what the proper thing is, and
2. It is evidence that you are reasonable and prudent, and that is always good to document.
Incorporating just these three things can make a huge difference in the amount of risk your business is taking on.