Top 10 Threats to Small Businesses (Part 1)

Top 10 Threats to Small Businesses (Part 1)

Confidence and optimism are what drives the entrepreneurial spirit, so it shouldn’t be too surprising that most small business owners describe themselves as optimists. Too much optimism or confidence can get a small business owner into trouble. A business plan should not be built solely on the “best case scenario”; like a house of cards one gust of wind – or wrongful termination lawsuit – and the entire business can come crashing down. It is important to balance optimism, confidence and reality; in other words learn to manage risks.

The first step to initiating a comprehensive risk management plan is to identify potential risks. Below we’ve compiled a list of the top 10 threats facing small business owners. As you are reading through the list, consider your small businesses’ unique risks and whether or not they are being managed effectively

  1. Protecting your Property
  • In order to protect your property, it is important to take a complete inventory of all your assets. Doing so will determine how a loss may affect your business and how much coverage you will need. Property coverage can come in many forms depending on your specific needs.
  • Small business owners have a lot weighing on their budget already, but don’t make the mistake of planning for the “best case scenario” when it comes to coverage. Leaving your small business underinsured is too great of a risk to take.

2. Business interruption

  • According to the U.S. Department of Labor, 40 percent of businesses never reopen after a disaster such as a flood or fire. Ask yourself if your business is prepared to weather the storm if disaster strikes? If a fire causes your building to be temporarily unusable, what should you do? In an ideal world, you’d move to a temporary location while your permanent place of business is being repaired. However, many businesses find themselves short on coverage when faced with a loss that closes their business or prevents their business from operating at full capacity. Losses such as these can greatly affect a brand and employee relationships.
  • In order to mitigate this risk, your agent has tools available to help estimate the amount of income you’ll need to replace to keep up with your expenses, loss of income and payroll.

3. Liability Losses

  • Running a small business can be fraught with unexpected surprises, no matter how well you plan. In order to avoid such surprises, small businesses owners should protect their assets by carrying adequate Commercial General Liability (CGL) Insurance coverage. CGL policies provide coverage for claims of bodily injury, or other physical injury, personal injury (libel or slander), advertising injury and property damage as a result of your products, premises, or operations. A CGL policy must have adequate limits in order for you to continue normal business operations while dealing with real or fraudulent claims of negligence or wrongdoing, and also provides coverage for the cost of defending and settling claims.

4. Key Person Losses

  • Small businesses tend to built around the talents and expertise of a few individuals. However there may come a time when an employee crucial to the functioning of your business departs unexpectedly due to death or injury. Would day to day operations continue as usual or would disorder and uncertainty ensue? Would you be able to maintain your current level of performance and current revenue stream? How would you cover for the financial loss of the employee or pay for a temporary replacement during his or her recovery?
  • Key Person Insurance can help you answer these questions with confidence. This coverage is designed to provide financial stability during a time of stress, allowing you to keep your business moving forward.

5. Injuries to Employees

  • Small business owners tend to struggle with understanding their employee health and safety obligations. Just like larger businesses, small businesses have the same responsibility to indemnify workers who are injured or become ill during the course of employment. Many businesses do not realize the full effect workplace accidents have on their organization. Beyond the initial treatment costs and lost production time, on-the-job injuries have an impact on insurance premiums, which can increase your costs for years to come.
  • However by managing exposures and promoting workplace safety, it is possible to control workers’ compensation premiums. Having proper pre- and post-accident procedures in place can reduce the severity of a workers’ compensation claim and implementing a comprehensive safety program can reduce the accident rate.


Check back with us next week as we explore the remaining five threats to small businesses!