When starting a small business, it is important to consider what the risks will be and how you can limit them. Here are six keys to limiting liability in your small business.
KEY 1: Be conscious of your cash flow
Cash flow is the life blood for any company, especially a small business. It is important that you have good accounting practices in place when you start your company. Ensure that your monthly budgets are realistic and that your expenses do not exceed your income. Furthermore, try to create a cash buffer which will help secure your business for three to six months if you should lose your biggest client or have other financial difficulties.
KEY 2: Choose a business structure which limits personal liability
It is important to change your business structure from a sole proprietorship (where personal liability is very high) to a company. It is better to try register your company so that your business becomes its own entity and some of the liability will lie with the company instead of with you personally.
KEY 3: Have adequate insurance
How well insured are you? Are you insured against personal injury? If you damage the property where you are working, are you covered? It is important to consult with an insurance expert and make sure that you are insured for all eventualities that your business could experience. Furthermore, it would be a good idea to insure yourself against things which may go wrong in your business so that you will not have to deal with the lawyer’s costs if you are taken to court.
KEY 4: Be careful what you say
When you become a business owner you need to watch your P’s and Q’s. The reason for this is that should you promise a client a certain service and not deliver, they could sue you. In addition, if you say something slanderous or defamatory online about another company or person, you could be sued. So it is important that you ensure you only speak business when you converse on your business social media pages and leave the hurt emotions at the door.
KEY 5: Diversify your product offering
If you only have one product offering, your company may run aground quickly if the product loses customer favour. So ensure that you have various offerings to provide back-up income streams should one of your offerings fail.
KEY 6: Think safety
Safety is a key issue when it comes to your business. Ensure that the environment where your employees and customers interact is safe. Ensure that you are insured should an injury occur on your premises. Not only do you have to consider the physical safety of your environment, it is important to think about the digital safety. With most businesses being run with computers it is important that you have safety precautions in place. Make sure that you have antivirus software on each computer and backup your information at least once a week. If you have sensitive client information on your computer, see to it that you have all the necessary software in place to ensure that your systems cannot be hacked.
By following these six keys you will be on your way to limiting your risks and liabilities in your small business.
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