Month: September 2021

Risk is an everyday part of owning any business — you’ll never eliminate it. The challenge is finding the right balance between profitability and peace of mind, often referred to as risk management. While risk management can be complex, it doesn’t have to be at first. Follow these five steps to get you moving in the right direction: 

Step #1: Identify your business risks.

Some risks are common to every business, while others will be specific to your business. Some initial risks include the following:

• • External environmental risks include market changes and economic issues that may affect your business.
  • Property losses are caused by physical damage, loss of use, or criminal activity.
  • Business interruption losses occur when you stop selling (or producing items to sell) for one reason or another — for example, a natural disaster like a fire or hurricane or a major technological-related issue.
  • Liability losses refer to the legal liability you have for any damage or injury caused to another person by your company.
  • Employee morale includes losing a key person to your organization due to a new job opportunity or retirement.
  • Employee injury occurs when one of your employees is hurt or injured while at work.

Step #2: Determine your risk level for each identified area of risk.

Consider your vulnerability within each risk and decide which ones are worth taking. For example, if you identify a risk that has a low probability of occurring and could potentially cost your company about $40,000, but you could protect against this loss for $35,000, it may not be worth it for you to use your resources this way.

During this step, you want to be as specific as possible — don’t leave anything out. That way, you can better protect yourself from a loss.

Step #3: Buy insurance to protect your business from loss.

Buying the right insurance is a central part of proper risk management. Here are some common types of business insurance you should consider:

• • General Liability Insurance: covers any expense due to injury to a third party, including property damage, bodily injury, medical costs and attorney fees (to represent your company).
  • Product Liability Insurance: covers any expenses due to injury or damage caused by a defective product you sell.
  • Professional Liability Insurance: covers any expenses due to injury or damage caused by services you provide, including malpractice, negligence and errors.
  • Commercial Property Insurance: protects your company’s physical assets from fire, explosions, burst pipes, storms, theft and vandalism. It’s important to point out that you will likely need to purchase separate earthquake and flood insurance.

Step #4: Prepare a contingency plan for your business.

In addition to buying insurance, you should create a contingency plan to protect yourself from other identified risks that may not be covered by insurance. Here are a few ideas to consider:

• • Install a security system to guard against theft and property loss.
  • Maintain an equipment maintenance schedule to ensure it is safe to use.
  • Update your computers with the latest protective software, such as anti-malware, anti-virus, etc.
  • Establish policies that protect your company from transactions with high-risk customers.
  • Implement policies that value employee safety over speed.
  • Train “high potential” employees and allow them to take on more responsible roles to keep them from leaving.

Step #5: Monitor and adjust your risk management plan.

You should review and update your risk management plan at least every six months. Often, insurance companies will provide advice on how to mitigate new risks you encounter. And if you’re looking to participate in new business opportunities, having a structured and updated risk management plan will help you get the investors you may need for success.

Where do you start?

We recommend discussing your business needs with a trusted insurance agent to ensure you get the right coverage at the best price possible. As your business expands, you may require more protection; therefore, review your coverage annually to ensure you have the best coverage available. Additionally, it may be a good idea to discuss your risk management plan with your business’s financial planner or a risk management consultant.

Your company’s credit report is just as important as your personal one. Credit bureaus keep records of debt payments and other credit information on your business, and lenders use that information to evaluate a credit or insurance application.

Why Does Having a Good Business Credit Score Matter?

• • It’s easier to qualify for a loan. As a business with excellent credit, you’ll likely get the loan your business needs quickly and painlessly.
  • You should receive better loan terms. In most instances, lenders will offer more favorable terms to a business with a positive credit history — and lower interest rates will save your business thousands of dollars each year.
  • It protects your personal finances. When you separate your personal and business financial obligations, you keep your personal credit rating from being impacted by any issue your business faces (and vice versa). However, in some instances, lenders may want to review your personal credit score in addition to your business credit report, so be sure you check both regularly for accuracy.
  • You may receive better rates and terms from suppliers. When you’re ready to purchase equipment and inventory and need to use credit, your suppliers will trust that your business is financially stable and capable of repaying debts.

Getting Started with Business Credit

Here are some steps to follow when you’re trying to build business credit:

• • Obtain an Employer Identification Number. A federal Employer Identification Number (EIN) is like a Social Security number for your business and is used for tax reporting purposes. It’s easy to apply for your EIN online. Get one here.
  • Get your business listed. Once your business is official, it’s a good idea to list your business phone number and location in a local online directory (or two). Additionally, open a business checking account in your legal business name and regularly use it to pay your bills.
  • Establish and maintain vendor credit. The better your relationship with your vendors, the more likely you can avoid paying upfront for the things you need. Consider securing net-60 or net-90 payment terms with a few of your vendors or suppliers who report payments to business credit reporting agencies. That way, you can begin to establish a positive business credit history.
  • Keep business and personal expenses separate. Make sure you only spend money from your business checking account to pay for business expenses. And when you apply for credit, do so with your business’s legal name. Keeping your business and personal expenses separate helps protect your personal finances and makes it easier to manage taxes.
  • Open a business credit card. You should have at least one business credit card to help with business expenses. Plus, it’s an easy way to begin to establish credit for your business. However, use caution and only use what you need. For example, just because you have a credit limit of $25,000 doesn’t mean you should use all of it.
  • Pay your debts on time. When you pay your bills on time, you show that you’re reliable and can effectively manage your debt. Conversely, a late payment history (especially severely delinquent payments) may negatively impact your credit rating.
  • Regularly monitor your credit. Review your credit report at least annually. If you find an error, let the credit bureau know immediately. If the error is in a Pinnacle Bank account, contact us immediately as well.

Get the help you need from Pinnacle Bank.

We know your business is your livelihood and want to ensure you have the tools and resources you need for success. We’re happy to discuss any questions you may have about establishing and maintaining credit for your business.

Social responsibility is how businesses make a concerted effort to enhance society and the environment where they live and serve. For example, some larger corporations use renewable energy resources for their manufacturing plants or find ways to divert waste from landfills. Others focus on charitable giving campaigns that give back to the community (or globally) in different ways.

But whether you’re big or small, when you practice authentic social responsibility, you have the opportunity to move your brand forward, increasing profits over time and simultaneously make changes where needed in your community. Furthermore, as a small business, you’re perfectly positioned to help in more specific ways within the community you serve than a larger corporation — you can genuinely make a difference.

Here are a few ideas to consider:

• • Get engaged with your community. Take some time to see what’s happening in your local area to find opportunities to pitch in and make a positive difference. Start with the non-profit organizations in your area. Assess their needs and reach out to those that pique your interest or make sense for your business. For example, if you’re a restaurant owner, consider ways to dispose of leftover food responsibly to local shelters or homeless centers. Additionally, you should participate in local events and collaborate with other businesses in the area to make an even more significant impact on your community.
  • Start small. You may not be able to make a huge impact today, but you can over time. For example, suppose you recycle or find other ways to minimize the waste of resources at your company (such as green marketing). In that case, you can take a significant step toward being socially responsible in your community. And if you add a recycle logo to your tagline, you then let others know what you’re doing, which may encourage them to do the same.
  • Offer your time or knowledge if you can’t offer money. As a small business owner, cash flow may be tight; however, money isn’t the only resource you can offer. Invest your time or expertise in an area of need in your community. For example, adopt a school in your area and teach students and teachers basic business skills they can use to enhance their future — and encourage your employees to do the same.
  • Make it personal. As a small business, the advantage you have is that you’re likely your company’s founder. That means everything you contribute (whether locally or globally) reflects your ethical compass and strategic direction. And that makes any contribution you make feel more authentic to the community you serve.
  • Give employees time off to contribute. Create a policy at your company that encourages employees to contribute time and other resources to local causes. You can adopt a cause as a company (using feedback from your employees) or allow them to pick and choose. But encourage participation and help them find ways to contribute. You’ll find that, over time, your employees will be happier and more committed to your company.

Why does social responsibility matter?

It can be challenging to compete with larger chains on price alone. But if your business is more socially conscious and engaged in your community, consumers will buy from you instead. As time progresses, you’ll experience more sales, happier employees, and a more substantial competitive advantage, no matter how large or small you may be.