History tells us that a unique business idea can take you a long way. Consider the introduction of K’nex or Spanx or even Uber, to name a few ideas and the millions that followed those innovators afterward. But with all the quick-thinking entrepreneurs out there, success typically boils down to how you manage your company, not only the product or service you’re selling. This post explores the risks most startups face and how to navigate them savvily. Let’s dive in.
For many new business owners, securing the capital to grow their business is challenging. Whether the money is in the form of venture capital or business loans, sourcing funds is tough. Plus, unforeseen expenses and sticking to a budget only add to the worries that the money will run out.
Although cash flow problems and other financial concerns aren’t challenges welcomed with open arms, most small businesses must face them. But improving your company’s financial health by sourcing funds isn’t about luck; instead, it’s about doing your due diligence and knowing your industry inside and out.
Additionally, most investors require specific types of coverage to safeguard their assets, including directors and officers (D&O) insurance. A D&O policy isn’t mandatory, but very few investors will consider funding companies without this healthy balance of risk and protection.
Managing a Team
Most top talent falls somewhere in between wanting security and wanting challenges— and it’s your job to find them. However, with remote work on the rise, hiring and managing a team is rapidly changing.
Furthermore, businesses must learn to attract and retain top talent differently than before the pandemic. A recent Bloomberg survey reported that nearly 40% of employees would consider resigning from their jobs if their current employer forced them to give up remote work.
Hiring the skilled individuals your company needs is a different ballgame now. Plus, with more social movements surfacing, workers are highly tuned to any violated employment practices, real or imagined. Keeping on top of best practices and remaining compliant with federal, state, and local laws is a must for small businesses.
Facing Everyday Exposures
Every entrepreneur knows that merely doing business opens up doors to risks. Bodily injury, such as famous “slip-and-fall” claims and property damage, pushes defense costs up to skyrocketing amounts. As a result, startups and small businesses can protect themselves from these vulnerabilities with a robust risk management plan, with general liability insurance as the foundation.
Consider a vendor delivering supplies to your facility but is injured after slipping on your floor. Who covers their medical expenses or any lost wages? For any company that purchased general liability coverage, this policy works to protect against these everyday exposures. Otherwise, these particular risks will carve away at your profit with out-of-pocket legal fees, medical expenses, and other costs.
Resolving Tech Issues
Any IT leader will tell you that 2020 was a nightmare-ish year. With nearly half of the American workforce working from home, IT specialists were busy around the clock. Cybersecurity, connectivity issues, and launching baby-faced digital services were tall orders.
Unsurprisingly, startups and small businesses face similar tech challenges. Whether it’s connecting remote teams or fighting off cybercriminals, technology presents many risks. Plus, as the most prominent malware attack, ransomware fees have climbed from an average of $5,000 in 2018 to $200,000 in 2020. Lamentably, the damage to businesses of all sizes is lasting.
As a result, many clients and vendors require companies to have cyber coverage before conducting business with them. Small companies are now more than ever re-evaluating their IT budget and investing in cyber insurance policies, reconfiguring their processes, and learning to educate their employees.
Entrepreneurs and startup teams are well-known for their hustle. After all, marketing and sales are the lifeblood of any rapidly growing business. However, scaling up can get lost in the dust as other issues take precedence.
Most entrepreneurs endure sleepless nights, worrying about how to attract more customers. And when the customers come, can your technology keep the pace? While these are all valid worries — and genuine insomnia culprits — scaling up is unique to each business.
So, surround yourself with those who have been there, done that. Build a strong team. Take analytics to heart by learning from the past. Protect your assets with a hefty risk management plan. Lastly, capitalize on what makes you different, and never stop perfecting your management skills.
Planning for the Future
Here’s a pro tip: plan to succeed. Many entrepreneurs make the mistake of only looking ten steps ahead of themselves when high-end success calls for 20 steps ahead. Take that idea one step further by expecting the market (and life) to throw you curveballs, such as a heart-stopping pandemic.
Be the leader who covers all the bases. You don’t have to know it all right now; you only need to be willing to learn it. Remember, you don’t have to give up any ground when you protect the ground you’ve already conquered.
CTA: Founder Shield is an insurance brokerage focused on providing scalable risk management solutions to high-growth companies. Contact us today to learn what risk management solutions are right for you.
Jonathan is the General Manager of Founder Shield, a boutique insurance brokerage specialized in serving emerging industries. He works to oversee client strategy and communication, and has fostered a culture of providing unparalleled service and risk consulting for some of the fastest growing companies in the world.