14 Easy Ways to Protect Your Small Business From Damage
Sian Victoria © - Mannequin and rail of clothing
How to Protect Your Business: Guide to Risks and Ways to Prevent
I’ve been self-employed since 2010, and I can honestly say that starting your own business is undoubtedly one of the most exciting challenges that you can undertake. You get the freedom to be your own boss, create something out of nothing, and see your vision become reality.
But while there is plenty of excitement, there is also another, much more subdued aspect to entrepreneurship that is just as important. And that is ensuring that your efforts are safe from any possible surprises, especially if you intend to stay in the game for a while.
This blog post represents your survival guide in its purest form. I will discuss 14 extremely useful and highly efficient ways to secure your business, ensure the safety of your personal assets, and keep things working smoothly every day.
1. Choose the right legal structure
It might be easy when starting to just go down the route of becoming a sole trader, as I did. The process is fast, requires very little bureaucracy, and will have you working within minutes.
However, being a sole trader will mean that you and your business become the same in the eyes of the law. Any debts or lawsuits that arise from the business will mean that all your assets, including the house you live in, are under threat.
Becoming a limited company can be the best decision you make in order to create a barrier between yourself and any business dealings. A limited company will have its own legal existence, so anything that happens from a business perspective will only be relevant to the business itself and not yourself.
2. Separate your personal and business finances
For convenience, you may find the temptation to use your personal bank account for doing any kind of business transactions, particularly at the beginning. You may assume it is much easier to make payments for your business subscriptions using your personal cards or take some fast payment from the client into your personal bank account. Nevertheless, mixing all your financial resources in such a way becomes a serious financial risk.
If you are running a limited company and mixing all your finances, there is a chance to face one of the legal risks called “Piercing of the Corporate Veil”. It means you will not be eligible for the protection which a limited company gives, since you were treating your business as one entity. So, be sure to consider opening a business bank account and getting a business credit card.
3. Put every agreement in writing
Though handshake deals and oral agreements may seem friendly and pleasant, they can be extremely hard to enforce when something goes wrong, or the individual you work with is a crook. It can happen all too easily for two parties to leave a discussion with two entirely different perspectives on what was discussed.
No matter whether you are dealing with a new customer, employing a freelancer, or collaborating with a provider, you require a written contract. A decent contract should include the scope of work, payments, deadlines, as well as provisions regarding the termination of the deal. It is not a distrustful act to write down your agreement in black and white, as it ensures everyone will understand everything from the get-go.
4. Invest in comprehensive business insurance
Hopefully, you would never even consider taking a vehicle on the road without insuring it properly, yet small business owners often run their businesses without adequate insurance coverage. A simple accident, an injury to someone who may have slipped on your premises, or even an error in providing services can lead to a claim amounting to hundreds of thousands of dollars against you, which can put an end to your business.
At a minimum, you must investigate the possibilities of obtaining public liability insurance, professional indemnity insurance, and employers' liability insurance, which is a necessity in the UK for any business with employees. The public liability insurance will cover you if you should be found responsible for any injury or damage to a person's property due to your business activities.
5. Build a strong digital defence
Cyber attacks are no longer an issue that can only affect huge corporations. Actually, small companies are often at risk of hacker attacks because they lack proper security measures. Any data breach will hurt your company's reputation and cost you lots of money, making everyday activities impossible.
You don't have to make your online protection extremely complex. Begin with having a strong password for all accounts and setting up multi-factor authentication wherever possible. Teach your employees how to detect phishing attempts, install good antivirus software and keep your business information backed up to a secure cloud server.
6. Take care of your intellectual property
Your trademark, your logo, the design of your products, and even the contents of your website are all valuable assets for your business. If you fail to protect them, you will see a rival stealing your concept or, at worst, filing for registration of your assets first.
Learn about applying for the protection of your trademarks regarding the names and logos for your business via the Intellectual Property Office. You should also be familiar with how copyright law safeguards your creations and content if you have designed something original yourself.
For example, my photography and videos across my website and social media are always being stolen. Hence, you need to put things in place to prevent and track the use of your content; to do this, I use a copyright sign and two copyright enforcement agencies that scan the misuse of my work. In some cases I get compensated for it if it's been stolen by a company of significance.
7. Keep your tax affairs in order
Taxation period is often quite stressful, yet being on top of your game when it comes to taxation is probably one of the best things that will help you save your business from any fines imposed by HM Revenue and Customs. Fines can be rather substantial and represent money you definitely would like to avoid spending.
Put away a certain amount of all payments you get in a savings account that acts as your ‘tax fund’ to ensure that you have enough money when the time comes. Make use of current cloud computing services that can help you manage all your expenses during the year. If taxes cause you trouble, an accountant can be an excellent investment for your business.
8. Draft clear terms and conditions
The terms and conditions you create are basically the game rules for those who do business with you. They have to include everything from late payment policy to refund policy, delivery conditions, and dispute resolution methods.
Having all your terms and conditions available on the website and in the client onboarding process is necessary to protect your financial flow and to set boundaries for yourself. In case a client does not want to pay for your services or wants a refund for whatever reason, your terms and conditions will be your main protection.
9. Understand your employment law obligations
As you grow your business, you will no doubt need to recruit people to assist with the burden. From that point onwards, however, you are faced with a number of legal obligations. UK employment law is very tough, and even innocent mistakes can result in expensive tribunals.
Be sure to give out employment contracts, offer at least the National Minimum Wage, and that you are doing everything right when it comes to holiday pay, sick pay, and health and safety in the workplace. When it comes to this, getting the advice of an HR professional or employment lawyer would be well worth your time.
10. Diversify your customer base
Being dependent on a single client for most of your earnings is an all-too-common mistake made by small companies. It is amazing to receive a big contract, but it can also be extremely dangerous. If such a client fails, reduces its budget, or simply changes its mind, your company can suddenly go down unexpectedly.
Always try to diversify your clients in a way that no client accounts for more than twenty per cent of your total income. It will significantly decrease the risks associated with losing your client, providing additional security to your company.
11. Create a business continuity plan
Consider what would happen if water damaged your facilities, your primary vendor went out of business, or if you were hospitalised or seriously ill. Most entrepreneurs would rather not consider such possibilities, but not planning for them can result in negative consequences to your business.
A business continuity plan entails putting your plans on paper for how your business will continue to operate in an emergency. Identify your risks, identify your backup vendors, and ensure that your staff understands who will run the business in your absence.
12. Install a smart security camera system
For maximum protection, you can't afford to ignore the physical aspects of your business. Whether you have a physical storefront, a place of work, a garden studio, a workshop or a storage place where you keep valuable stock and equipment, there are physical security measures that must be implemented to ensure you are properly covered.
These are the physical security measures that will lock down your business premises and protect all your valuable physical assets. The first thing you must do is to install security cameras. Installing security cameras is one of the most effective ways of deterring intruders from attempting any theft. Today, security cameras are extremely cheap and very sophisticated, compared to the old days when we only had poor CCTV systems.
Install your security cameras in areas like the main door, back doors and windows, places where you keep your stock, as well as the area where you have cash registers. You should install a camera system which stores its footage in the cloud and that alerts you via your phone when it senses suspicious activity after business hours. That way, you won't have your footage erased even when someone attempts to tamper with your security system.
13. Use heavy-duty padlocks and physical barriers
The tried and tested method of good quality locks is your first port of call when facing opportunistic thefts. The majority of break-ins occur due to open access or easy-to-disengage locks installed on entry points such as doors, gates, or shutters.
You’ll need to get some heavy-duty and waterproof padlocks to secure your gates, shutters, and any outdoor storage units. You must ensure that locks do not have exposed shackles since they are relatively easy to cut by means of bolt croppers. For the main entry points, you should install high-security cylinder locks resistant to drilling and picking.
Ideally, you’ll need to consider the elements too; waterproof padlocks are built to work in wet conditions so if you are in a rainy country like the UK this needs to be factored into your decision.
14. Listen to the professionals
In cases when you are managing a company with limited resources, the temptation to do everything oneself can be very high. I know that all too well. If you're like me, you may end up doing everything from drafting the necessary legal documents and filing complicated tax returns to doing your own computer security and creating all your own content.
However, while there are some things that can be done in a DIY way very successfully, trying to solve difficult legal and financial problems without professional assistance is extremely risky. Creating a group of advisers, such as a really good accountant, a business attorney and an IT professional, would be a smart move to secure your business operations.
To conclude
Protecting your company does not mean living in fear of things that could happen to it. It means providing a solid foundation from which you can build your company without worry. Taking just a few steps today, such as separation of accounts, obtaining proper insurance, and documenting your contracts, will pay off in huge savings of both anxiety and expense down the road. So, spend some time this week looking at the following areas and begin by picking one or two to tackle first.
