Tip Sheet #1
The Business Killers- Solutions for what keep you awake at night
Tip Sheet #1 (May 2011)
Business Killers is a monthly publication aimed at helping you become a superb crisis leader. By implementing these simple tips and strategies, you will go a long way to avoiding, preventing, controlling, and adequately responding to the risks that you face as a business owner. This is a sample of what subscribers receive monthly, so you can get an idea of the value you will receive. Each month will feature new points and process to help your business thrive.
1. Obsolete Insurance Policies. This happens when you and your agent either don’t annually review your policy, or simply go through the motions (which ends up being worse). Your business changes every year in order to grow and develop. Your insurance protection needs to match that. The consequences include being uninsured, underinsured, or being forced into becoming a “co-insurer” of your own claim. Each one of those means money out of your pocket. Don’t get caught in the “apathy trap.” This happens when you get so busy that you simply don’t have time and believe your agent has already done everything.
Solution: Demand an annual review of your policy by your agent. This should be either in person or by phone. Don’t accept an e-mail substitute asking if there are any changes. That’s their job, not yours. Even if you have an agent that you just love, you must demand that they do their job.
2. Coinsurance Calamity. Check your commercial property insurance policy. Look for the word “Coinsurance” and see if you have a percentage of either 80% or 90%. If you do, immediately call your agent. Coinsurance is never good for you, only for the company. It’s a penalty on you for being underinsured, and will make you a “co-insurer” of your own claim above and beyond a deductible. This occurs when you have an obsolete insurance policy and/or you simply don’t understand the conditions of a commercial property policy. If you’ve not yet studied one of these documents (as your gently asked to do by your agent and company), then you’re liable to pay a lot of money towards your own property claim.
Solution: Demand that you get an endorsement called “Actual Value” on your commercial property. This will require you and your agent to determine a proper dollar limit to insure your property and must gain agreement from the insurer. That being said, the time investment is worth it if you don’t have to dig deep in your own pocket to cover your claim.
3. Employee to Employer – You’re Fired! It never ceases to amaze me how many small business owners fail to insure for what may be the most probable place they could face a claim – an employee lawsuit. In today’s litigious society, it’s easy pickings for such claims like sexual harassment, age discrimination, wrongful termination, and time & wage claims. Don’t tell me that you “know” these people, or that everyone’s “family.” The truth is that employment practices lawsuits continue to be on the rise and present a greater threat to you than a fire, flood, or tornado.
Solution: If you have employees (and I mean even one), you must procure Employment Practices Liability (EPL). Amazingly, in the face of increased claims, I’ve found that EPL insurance has become more affordable as insurers understand the perils better. The better your hiring practices and procedures are, the less you will pay in premiums.
4. Funding the Partners. If you’ve got partners, then you’ve probably got a Buy-Sell Agreement in place to deal with issues of death and disability. If you haven’t done this step, run briskly to your attorney and get it done. Death and disability to partners often puts the ownership of their portion of the business in the hands of spouses or children who want no part of the business. What they do want is a payout. You must contractually set provisions for this. Once you’ve completed the Buy-Sell Agreement, then you must fund it with life and disability insurance. In my years in this business, I’ve often been shocked as to how many Buy-Sells were unfunded (Note-actually they are all funded, however sometimes by the owner’s personal bank accounts). The consequences of improperly funded agreements can put you out of business after the death or disability of a partner.
Solution – Buy life and disability insurance policies to adequately fund your agreement and then keep it updated (see obsolescence in Tip #1). Yes, it’s a financial investment that may impact the cash flow a little. I guarantee you that your cash flow will be immeasurably harmed if you suffer a loss that now must be funded by you.
5. In Case of Emergency. How many of your employees know First Aid and CPR? When was the last time they were trained? How many expired CPR cards are in your office or plant? The lives of your employees and of those who enter your premises or job sites are more valuable than any asset you have. Someone dying because no one could provide aid would cause unimaginable harm. Your reputation, morale, and liability are all on the line. Recently, a friend of mine who owned an auto repair shop died at work. The people there were trained and did their best, but to no avail. At least they were trained and tried. Can you imagine the cost to you if nobody knew what to do in a situation at your place of business? The cost goes deeper than zeros on a lawsuit.
Solution – Ensure all your employees are trained for CPR/First Aid. That’s right…all. I know the law doesn’t mandate this, but why would you take a chance? Buy a defibrillator unit and make sure everyone knows where it is and how to use it. Who knows, the life you save may be your own.
Bonus: Several years ago, I was eating dinner at my parent’s home when my mother began to choke. I had been trained for over half my life in first aid and immediately confirmed that she was choking. I told my dad to call 911, and began the Heimlich Maneuver. It worked. My mother lived and is still around at 87 years old. I guarantee you; the years of training put me in a mode of “unconscious competence.” I just reacted. When you’re CPR and First Aid trained, the likelihood of saving the life of a family member or co-worker is greater because they are whom you spend the majority of your life with. Be a hero and learn how to save someone’s life and demand the same of your team.
Legendary Leadership
Have you seen the Academy Award winning movie, The King’s Speech? Without giving away the story to those of you who haven’t yet seen it, I will solely use historical evidence. King George VI gave a brilliant radio address to his countrymen and those in the British colonies, shortly after Hitler invaded Poland on September 1, 1939. The speech, though anxiety-filled for a leader with a speech impediment, was delivered with humility, depth of feeling, and great inspiration. How prepared are you to give a speech filled with the same attributes to your team in the face of a crisis?
Your crisis undoubtedly will not be that of a despot invading your company. However, it may be that a fire, a tornado, or a hurricane has destroyed your business. It may be that your server room is flooded; a co-worker has been injured; or layoffs must occur. Regardless of the crisis, your leadership must include the ability to herald your message in an empathetic, yet strong voice that inspires your audience. That is legendary leadership. Just like preparing for crisis operationally, you must also practice for that “King-sized” address you may someday need to give.
Crisis: In the News
- Wall Street Journal (April 20, 2011) – FDA Warns Delta After Finding Rodent Waste on Plane. Can you imagine the reputation crisis this caused a major airline in the middle of heightened competition? Rat poop isn’t an “insurable” risk; however it creates a tremendous crisis for the company. How do they respond? Who’s the voice of the organization? How do they mend this bad publicity? Maybe the better question for you is, how are you set up to deal with your own bad publicity?
- Wall Street Journal (March 28, 2011) – Chemical Reaction: iPod is Short Key Material. The disaster in Japan causes Apple a problem. The tight supply of lithium-ion batteries used in iPods is threatened by the consequences of the earthquake causing a supply chain crisis. What’s Plan B? For you, the question is, how adversely affected are you by disaster to your supply chain? Did you know that you ca actually insure for losses to your vital vendors, manufacturers, and customers?
- New York Times (May 17, 2011) – Schwarzenegger Fathered Child with Employee. Oops. The former Governor of California and mega-superstar recently announced a separation from his celebrity wife, Maria Shriver. Looks like this indiscretion had a lot to do with it. What does this have to do with you? Sexual harassment is still the leading cause of employee lawsuits. Do you know what’s going on in your business with your supervisors, managers, and team? Are you a sitting duck waiting for a notice that one of your supervisors had an affair with a subordinate; made sexual innuendo that lead to a lawsuit; or poor morale leading to even poorer efficiency?
I challenge you to pick up your local paper and search for examples in your own home town or region. The misfortune of others should serve as a warning for you. It can and does happen to all business. How prepared you are for your crisis will determine how successfully you transition from crisis to opportunity.
If you ever have a job that’s too big for you in risk and crisis management, I encourage you to call me. I have several services and programs at various fees to fit most budgets. Don’t wait until after the crisis occurs. It will be more expensive in many ways. You’ll save a great deal of money, time, and anxiety by avoiding “crisis mode” and being a crisis leader!
© 2011 Dan Weedin. All Rights Reserved
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Great specific examples! Very useful.
Thanks, David!