Getting the advice you really need

Entrepreneurs and owners of small to mid-sized businesses value their independence.

Entrepreneurs and owners of small to mid-sized businesses value their independence. It’s the reason so many people set off on their own to begin with. Although this independence is exciting and empowering, it doesn’t mean small businesses should always “go it alone.”

In fact, this approach can actually be detrimental. A joint study by RSA, a small business insurer, and Queen’s School of Business reveals that many small businesses are missing out on valuable and strategic counsel.

Such strategic counsel can come in the form of an advisory board. Contrary to what many business owners may think, creating an advisory board doesn’t have to be a formal and time-consuming process. It can be as simple as meeting with your top suppliers every quarter to “talk shop.” Chances are, your suppliers are also in touch with your competitors and can inform you of what key trends are emerging in the pizza industry. You can also plan a coffee date with your lawyer or insurance advisor to find out what options are available to you as your business grows or changes; this will also help you stay updated on trends and gain competitive intelligence. An informal advisory board is a cost-effective way to gain insight and is as easy as tapping into the often underutilized resources your already have access to.

A conversation with a trusted insurance advisor, for instance, can alleviate some of the stress and worry running a business causes from time to time, and can even prevent major headaches down the road.

For example, a general property policy covers only damage to machinery by an insured peril; however, every business is in danger of having its work interrupted by a breakdown of its critical equipment. If one or more of your pizza ovens breaks down, it usually means a loss of profits. Anytime a business operates very specific and expensive equipment such as dough mixers, sheeters, rollers or wrapping/packaging machines, it should consider having equipment breakdown insurance (EBI). This policy provides coverage for the cost to repair/replace objects such as refrigeration units (fridges, freezers) and production machinery damaged by a sudden and accidental failure, the loss of business income, and the extra expense incurred to resume business. The potential impact of a major loss to an operation’s equipment could be more far-reaching than one might expect – it could impact a company’s ability to retain current and future customers.

When looking for an advisor in any field, small business owners should keep the following in mind:

• Qualifications: Ensure your advisor has the appropriate qualifications. This could include an insurance broker licence, a lawyer’s or accountant’s professional degree, a university degree in the area of expertise, or some other professional training relative to the area of work.
• References from other small business owners/managers: Talking to others will help you understand an advisor’s approach and style to make sure they fit with yours.
• Expertise: Factors such as the degree of expertise, the number of years’ experience as an advisor, and the percentage of time spent practising in that area are critically important.

In addition to advisors, below are some other important considerations for small businesses to help mitigate risk:
Commercial general liability: Make sure you consider what amount of liability coverage you need for both your business and your operations.  If, for example, a customer suffers a serious injury on your property and sues, and you don’t have enough coverage, you could end up paying out of pocket. In some cases this could result in a significant financial loss and risk to your business.

Business interruption: This coverage is designed to provide protection for loss of earnings and necessary continuing operating expenses following material damages from events such as a fire or water damage from a pipe burst. In other words, it will provide you with support when your business is temporarily unable to operate as it normally does.  

Property coverage: It’s extremely important that small business owners have coverage in place to protect their stock and equipment, and the building itself if they own it. 

Loss control benefits: Taking proactive steps to protect your property is one of the most important things you can do to mitigate risk. For example, if you install an alarm system, you may prevent or significantly reduce the financial impact of a fire or a burglary. Installing an alarm may also reduce the cost of your insurance as you may qualify for an alarm discount – this discount may offset the cost of installing the alarm system.

Protecting your business means investing in future growth. Finding the right advisor and leveraging that person’s expertise can help you develop strategies for growth while identifying and minimizing risk to the business you work so hard to build.

Beckie Scarrow is the director, SME Underwriting, for RSA.