Small business insurance in difficult economic times

Life has been difficult since the recession hit. Even something as routine as an overdraft has become difficult, bigger loans are impossible without adequate security. Then customers and clients have been cutting back on their discretionary spending. Yet overheads continue increasing, none the least being insurance premiums. So this creates pressure to review the insurance portfolio to confirm exactly what is covered and decide whether it’s still good value for money. When money is tight, it focuses the mind on the nature of the risks you are prepared to run without full cover.

While you are thinking about this, here’s a more general question to chew on. How do you make business decisions? Recent surveys suggest the majority of people running small businesses believe in themselves and, rather than rely on methods and techniques they picked up on their way through whatever business courses they took, they fall back on gut instinct. Why is this?

Well, when you look at the spectacular way in which all these academically gifted people managed to mess up the banking system, you can be forgiven for thinking an MBA is not the greatest basis for decision-making. All the major business failures over the last five years have featured groups of people with more credentials than business sense. Indeed, it’s now clear many of the business models taught in schools, colleges and universities are broken. Often the best way to bring a business idea to the market is the entrepreneurial spirit. Interestingly, this is not something easily taught or learned. People either have the drive to set up a business and keep it running no matter what, or they find themselves somewhere safe to hide. Indeed, a real part of the problem has been the compensation and bonuses paid to many employees. It’s given them an incentive to work for their own benefit, rather than working to make their employer’s business stronger.

Curiously, a recession is the time when the real entrepreneurs prove themselves. When you look around, there are so many opportunities to explore. As property values have fallen and the number of business failures has risen, you should be negotiating a reduction in your rent or costing a move to cheaper premises. There’s a lot of stock available in fire-sales and a growing crowd of experienced people who will accept low salaries to be rescued from the ranks of the unemployed. No one says you have to be nice to be a success. If this means you take advantage of others’ weakness, it simply confirms your drive to be a success.

When it comes to insurance, it also suggests entrepreneurs are more comfortable with risk. You cannot run a business unless you are flexible in the face of uncertainty. The ones most likely to fail are those who insist the future be predictable — just like it says in the books. Entrepreneurs believe they can shape the future by their own actions although, truth be told, that does not mean doing without business insurance. The reality is that, regardless of size, all businesses benefit from holding adequate insurance against the most common threats. So discuss the scope of your coverage with your small business insurance advisor and ensure you have just enough coverage for your needs.

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