Starting a new business puts you in a unique position that most other people will never experience. You will spend the next several years doing the business equivalent of walking against a strong headwind doing everything it can to blow you back. And along the way, there will be plenty of circumstances capable of derailing your start-up. Be prepared.
Businesses do not succeed by magic. Success is the result of hard work, managed risk, a good mix of passion and pragmatism, and some good luck thrown in for extra measure. Along the way, business owners do what they can to protect themselves against certain kinds of risks.
Do you want to succeed as an entrepreneur? Then you need to prevent certain circumstances from derailing your business. Four such circumstances are described below. They are followed by a single solution that covers all of them.
4 Things That Can Derail Your Start-Up
You have been in business now for several months. Everything is going swimmingly until that day an unexpected circumstance crops up. You suddenly realise that, unless something changes, both your business and your personal finances are at risk. What will you do?
Here are four circumstances that could prove to be your undoing:
1. Loss of Income
You may find yourself doing just fine until an injury prevents you from working. Now you cannot take care of your customers or meet your obligations, so you are also not earning any money. You have a couple of options here. First, you can keep working and risk making matters worse or you can stay home, focus on your recovery and get back to work as soon as possible. But what do you do for money in the meantime?
2. Critical Illness
There are a number of different ways to suffer loss of income, from injury to legal issues. But what if you are diagnosed with a critical illness like cancer or stroke? You’re no longer talking a temporary loss of income that will pass in time. You are now talking about an illness that could quite possibly prevent you from ever working again.
Making matters worse are those unintended expenses that come with critical illness, expenses that are not covered by NHS services. Now your business assets could be at risk. You may have to start selling them off just to pay the bills.
3. Liability Claim
Maybe it is not injury or illness that slows you down. Perhaps it’s a liability claim made against you by one of your former clients. Liability claims can threaten both your business and personal assets to the degree that you might very well have to shut down your company. All of your hard work could go down the drain as a result of one unhappy customer who feels like he or she has been wronged.
4. Your Own Death
Even your death can derail the business you worked so hard to build. No longer having the income you generate could mean your family has to sell the business just to pay the bills. And if there is no financial means available to cover the costs of your funeral or burial, an additional financial strain could be placed on your business. Your surviving loved ones may have to make a decision about your business out of financial necessity rather than the hopes and dreams you always expressed.
How to Protect Yourself
Each of the four scenarios listed here are not as uncommon as you might think. The fact is that we live in an imperfect world where things happen. Fortunately, there is a solution: insurance. Yes indeed, insurance exists specifically because we live in a world where things do not always go as planned.
Lost income and critical illness cover protect you in the event you are injured or fall ill while running your business. The former pays regular income while the latter pays a lump sum. Private medical insurance can also help in these situations by giving you access to private medical care.
Household insurance, personal liability, and business liability are all options for protecting yourself against a liability claim. You can get away without household insurance if you have both private and business liability in place.
Finally, protect your business assets following your death with a life insurance policy that both replaces lost income and covers your funeral and burial expenses. Life insurance will give your survivors a financial cushion they can depend on while they take the necessary time to determine what to do with your business. Insurance for the self-employed is not something to skip, think again and make sure you cover yourself to prevent certain circumstances from derailing your business.
*This is a collaborative post. For further information please refer to my disclosure page.