By Blake DuBose and Mike DuBose
When it comes to threats and crises, no business is ever completely out of harm’s way. However, businesses (and leaders) that survive in the face of threats share some common attributes. Actions they take include:
Building the right culture: Leaders should instill open environments where employees feel comfortable expressing concerns about threats, can critically dissect the business’ activities, and can implement a SWOT analysis (examining strengths, weaknesses, opportunities, and threats). All findings should be fed into the business’ future strategic plans.
Identifying threats: While many threats are easily detectable, some appear out of nowhere! Everyone should think of the worst scenarios that could happen to the company, no matter how farfetched. Like the federal government, which hired Disney’s innovators to identify “out-of-the-box” terrorist possibilities after 9/11, businesses must think of all potential threats, however unlikely.
After identifying threats, develop strategies to monitor, identify, prevent, and plan for problems. For example, violent weather is a threat to our Columbia Conference Center. To test staff readiness, we once asked a customer with 400 guests in our facility to fake a tornado drill. We set off the alarms and sent 400 screaming people to the basement; luckily, our unsuspecting staff did a great job of guiding them to safety! They had practiced our procedures before, but we wanted to observe their response when faced with a “real-life” scenario.
Structuring companies to withstand threats: We separated our company into five separate legal entities, placing most assets in the low-risk business and few in the riskier companies. We operate each self-sustaining business independently, using different checking accounts, policies, staff assignments, contracts, billings, and legal structures. Thus, if one company is engaged in a legal battle, others won’t be drawn in. Our contracts specify responsibilities and are set up to expose us to the fewest possible liabilities. Consult lawyers and accountants about the best way to structure your businesses and contracts.
Insuring against threats: We have experienced many legal battles and, fortunately, have prevailed. Our successes resulted from a “hope for the best, plan for the worst” attitude, maintaining good insurance, and always listening for faint trouble signals.
Selecting the right insurance agent: Having worked with many insurance agents over 30 years, we have discovered that the best ones promptly return our communications; competitively price our insurance with several reputable insurance businesses (ranked by Consumer Reports); are knowledgeable about different insurance types; spend quality time with us assessing needs and threats; assemble good plans of action; and are friendly and customer-driven.
Scott Moseley with Irmo Insurance Company consistently exceeds our high expectations and provides most of our personal and business insurance. He recommends seeking out “an experienced, trusted advisor with an established agency.”
“To find independent agents, visit www.TrustedChoice.com. These agents represent multiple insurance companies and offer varieties of coverage and customized plans for protections you need,” Moseley says.
Selecting the right insurance and coverage level: There are six areas of insurance (life, personal, comprehensive, liability, medical, and disability). We have been horrified in the past as owners or key employees of other companies unexpectedly dropped dead or became disabled. In the best cases, they had developed clear succession plans and purchased plenty of insurance. In other situations, however, their spouses or partners inherited many problems.
Life insurance protects families and staff who are left behind to continue the business. The healthier and younger you are when life insurance is purchased, the lower the premiums. Term life is the cheapest, but it doesn’t build value like more expensive whole life insurance. Determine how much money your family will need to live on, keep the business going, pay taxes, etc.; then lock in 20-year fixed life insurance prices. Estate tax law is changing, and as of the writing of this article, President Obama agreed to a 35% rate over $5 million in 2011. Many businesses fail when those who succeed the owner lack adequate cash to pay estate taxes.
Personal insurance protects businesses against individual lawsuits. For example, say a couple owns a car and a business. While driving the automobile, their teenager causes an accident that kills someone. A multimillion dollar lawsuit is settled against the couple, and their personal assets and company stock are vulnerable to being taken. To avoid such situations, higher levels of auto coverage and liability insurance can be added to personal home policies. They are relatively inexpensive—a $2 million liability policy costs only a few hundred dollars.
Comprehensive business insurance covers your employees and business against most perils (fire, water damage, weather, and other catastrophes). You need it to ensure that employees are still paid even if the business cannot function.
Business liability coverage addresses threats beyond those covered in comprehensive policies. A SC restaurant didn’t cook its food properly, sickening and even killing some customers. It was sued for $14 million (which it could have been protected from by liability insurance)! We carry $4 million for each of our businesses.
Medical insurance is a must, since major illnesses can wipe out financial assets. Without it, sick owners may be forced to sell their businesses to pay hospital bills.
Disability insurance should be considered—one in seven people will become disabled before age 65 (and one in five will in their lifetime), according to www.disabled-world.com! Thus, disabilities befalling owners, key employees, or staff could be catastrophic (and not at all unlikely) for a business.
Our employees and businesses receive an array of benefits through Administaff. By pooling our 50 employees with Administaff’s 5,800 client companies and 103,000 worksite employees nationwide, we secure excellent coverage, including medical, dental, vision, prescription drug, disability, and life insurance. Administaff also manages our payroll processing, 401(k) plans, employer-related taxes, and other employee-related paperwork. This excellent company assumes most of our administrative burdens at a good price so we can stay focused on business.
If you desire to reduce insurance costs, consider higher deductibles, and if you own multiple companies, ask your lawyer and accountant about placing all employees into a single legal entity with no assets. You can then lease staff to your companies to lower insurance costs and enhance liability protection. You can also ask your insurance representive to price your insurance based on all employees from different companies as a single group.
Threats are part of doing business, but many can be prevented or managed if leaders are proactive in their preparations. Remember: the best threat is one that never happens. When a crisis occurs, make sure you are protected by the right kinds and amounts of insurance. Hopefully, you will never have to use it!
