Protect your new business

by Norma

It’s easier than you think to destroy a new business

RuinNewBusinessWatch out for these seemingly innocuous business decisions that can lead to financial ruin:

  • Extension Cords. People get cold feet and they get a space heater. They plug it into a two-pronged extension cord and forget to unplug it when they leave work. That night your entire new business burns to the ground. Your brilliant marketing plan, your three-year projections, all of your records, your new product samples—gone! Ban any extension cords in your business that are not three-pronged. Holidays decorations can turn, “Ho! Ho! Ho!” into, “Oh, No! No!” so take extra caution.
  • Bad Receivables. OK, you are using good judgment as to which customers get credit and how much. Even so, it is very easy to get into a business-life-threatening situation because a big customer goes broke. Bad things happen to good people. Good and honest intentions do not always result in getting paid. It is very painful and difficult to cut off an old customer, especially when you need the business. We learned the hard way when a customer went bankrupt and left our graphic design company on the hook for his large printing bill. Now we require the costs for customer’s printing up front.
  • Interviewing. It is both art and science. Like a bad science experiment, it can cause explosions. Someone who hasn’t been properly trained to interview prospective employees is a recipe for disaster. There are many questions that you cannot ask without risking a nasty lawsuit that will cost plenty of time and money. Check out state-by-state listings to learn more about hiring legalities,
  • No Background Checks. There are some bad people out there looking for jobs. Even with background checks, there is no guarantee that you won’t have a problem, but it will certainly improve the odds.
  • Lacking Insurance. An insurance broker divulged what the three biggest new business insurance failings were: understating insurance to value;  not having employment-practices insurance; and not having business-income replacement coverage. Business-income replacement coverage replaces lost revenue when disaster strikes. It is no secret that the insurance companies are in a bigger hurry to settle a claim when they are paying out money every week to replace that income.
  • No Vehicle Insurance. Legal liabilities aren’t based on your ability to pay, and company vehicles are rolling liabilities. Allowing someone who is not properly insured through the company to drive a company vehicle can have disastrous results if there is an accident. Companies are seen as having “deep pockets”–even if the pockets are empty.
  • Ignoring Vehicle Maintenance. With the demise of the full-service gas station and longer intervals between oil changes, many people drive on under-inflated tires. Radial tires makes under-inflated tires less noticeable. Under-inflated tires are more likely to cause a blowout, which can result in very bad things. Check all of your vehicles at least once a month.
  • Texting! Texting while driving is the new drunk driving. Do not do it! Do not allow employees to do it.
  • Wrong Accountant. Many accountants just do tax returns and are not qualified to act as an outside voice and keep an eye on the financial health of the company. Many companies fail because the owners didn’t know what they didn’t know. Get a good overall accountant—not a once-a-year tax man.
  • Bad Financial Controls. Many companies have gone broke because of theft or embezzlement. Your accountant must help you set up these systems or get a different accountant.

An ounce of prevention is worth a pound of cure. Benjamin Franklin was a good businessman.

SketchPad, our graphic design company, is glad to supply firm estimates for your advertising, marketing or website projects.

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