Your business is your livelihood. Financial moves must be part of a planned strategy to ensure both that it operates profitably and that, should a disaster happen, the impact is minimised.
Disruption and blips
However well managed, most businesses will encounter problems, some blips, others with the potential to cause severe disruption, and even breakdown. When problems do occur, the insurance provider can help to minimise the effects and get the operation working. Insurance strategy must therefore look both at the current state of the business and its likely future. It must also try to cover risks from all angles.
Independent advice from a registered broker, governed by a professional code of conduct, will be a first step in finding the right deal, in planning the type and extent of cover, and possibly with making claims as well.
Some companies may specialise in particular business sectors, such as textile care. Knowing the industry, they will have a good idea of its specific risks, that might get overlooked by an outside agency, even one highly qualified in the insurance world. For example, if your customer suffers a fire or other disaster, would damage to or loss of your rental stock be covered? Another advantage of seeking out a specialist insurer is that they may offer tailored packages.
Talking to friends in the same business as yourself, or seeking trade association advice could also help in the search for the right provider.
Taking time to plan and preferably write down the areas of the business that need to be covered is wise. Try to think how you would ensure continuity with customers if the worst happened and the business had to go on hold temporarily.
Though disasters can happen to any company, the better the management, the lower the risk.
Are you following correct health and safety guidelines and are your staff doing so? Have you assessed the risks properly and do staff have clear guidelines to follow? Some preventative measures are required by regulations – proper fire extinguishers for example. Staff must be given information on how to use them.
Providing proof
Additional equipment, however will be further proof of a well-managed operation and could help reduce costs. And if a disaster does occur, have you thought in detail what you would do, what the costs would be? Planning is the key to finding the right solution and the best value.
Insurance should of course take account of any investment that you are planning to upgrade equipment or expand the business.
But the investment itself must be protected not just by insurance but be careful strategy.
The first question must be: can you afford to invest? What will the investment bring to the business? Will it bring in more custom? Will it improve or expand the service offered, perhaps even allow you to increase the rate charged?
Time to invest
Is this the right time to invest, in terms of the particular business? A big investment should be part of a long-term strategy. Do the calculations and see if they back your view that this is the right time.
Having decided to invest, where will the funding come from? Banks, investment partners, and specialist finance leasing companies are the main sources. If the business has a good relationship with the bank, it may be a wise choice, but having drawn up plans, check out the terms offered in fine detail. Find out what guarantees bank requires.
Taking on an investment partner might suit but this involves bringing an outsider into the operation. What happens if business owner and investment partner disagree or one wants to back out of the deal? Seek legal help on drawing up the partnership terms.
If a specialist finance company is the chosen route, get to know it. Talk to its customers if possible before making the final decision. Applications must be prepared carefully, whatever the funding source. Present an accurate picture of the company and its past record, being realistic about its prospects. Don’t try to hide any problems you have had. Back your plans with figures.
Before agreeing, check the small print and get an expert to check it as well if possible.
Whether to buy, rent or lease equipment needed for upgrade or expansion is another decision to make. Whatever the choice, examine the deal offered in detail, in particular servicing arrangements.
If buying outright, check what the warranty covers, how long it lasts and who takes responsibility for servicing the equipment. Servicing will also be an important detail in a lease agreement. Find out if there are any exclusion clauses and what happens if the equipment does not last as long as the lease.
Buy, rent or lease
Renting equipment avoids the costs of depreciation, but again read the small print. Is the servicing carried out by the rental company or is it subcontracted. You should find out what would happen if the subcontractor goes out of business, or if the equipment reaches a stage where repair is no longer cost effective.
As with all financial details, the route to successful investment lies in planning, finding the deal that is right for the business concerned and in all cases reading the small print.
