Starting a business is a dream for many people. Stepping out on to your own can be an exciting journey for some people, but it comes with an enormous amount of risk. When you operate your own business, surprises come in all forms and sizes. Having a plan for these surprises can go a long way towards determining the ultimate success or failure of a business.
4 Risks Business Owners Often Forget
Here are four risks many small business owners make that can limit the success of their business.
There is not a perfect way to determine how your business should be classified. Two businesses operating in the same industry might classify the business differently for a number of reasons.
Thinking about the impacts of your classification over the short and the long term of your business is essential to the success of your business. Anticipating where your business might be down the road is crucial. Accurately estimating how many employees you hire and how active the owners are going to be in the business can impact which classification you choose.
Here are the 6 most common classifications business owners choose:
- Sole Proprietorship
- Limited Liability Corporation (LLC)
- S Corporation
There are many things to consider that will determine which classification you choose. This is a step in the start-up process to take seriously because making the right decision can limit excessive fees in the future if you prevent the need to reclassify. Consider if you are going to work by yourself or if you are going to take on partners. Think about how involved you or the other investors are going to be in the business.
There are several businesses like My Corporation or Legal Zoom that specialize in the process of filing your business. Consulting with an experienced accountant can help prevent a lot of headaches when it comes time to file taxes.
2) Making sure your business is classified properly for insurance purposes.
Not only is it important to classify your business properly, but it is equally important to have your business classified properly for both Workers’ Compensation and General Liability Insurance.
Both Workers Comp and General Liability coverage is required by law in nearly every state across the country. The type of business you are in can dramatically change the price you pay for premium. Most business owners can understand that a business operating in an office setting take son less risk than a construction company operating on the top of a 20-story building. Because of this additional risk the amount a business pays for insurance premium is reflected. Even within industries there are different workers compensation classification codes.
Landscaping is a classic example of an industry that has drastically different classification codes. Some Landscaping businesses only mow existing lawns while other businesses install sod and climb high in to trees with chainsaws. If you do not clarify these types of activities with your insurance agent, you may pay for more in premium than is necessary.
3) Find and Retain Profitable Customers
Once you have determined how to properly classify your business, you have ensured that your business is classified properly for insurance purposes and you have put in policies to ensure the safety of your employees; you have to find successful ways to find and retain profitable customers. One of the best ways to operate a successful business is to find customers that have a problem only you can solve. Communicating the fact that you can solve their problem is equally essential to gaining and retaining customers.
Far too many businesses only focus on the sales aspect of gaining customers and do not focus on retaining their existing customers. In order to grow your customer base, you must first retain a majority of your current customers. Customer service is essential to this goal, because it is the best way to solve customers’ problems and keep them with your business.
Once your business has developed a strong focus on retention next you should focus on gaining new customers. Gaining new customers starts by researching the customer base you have and identifying the characteristics of your best customers. A common way to do this is through a survey.
Attaching some reward to completion of the survey is a good way to get a larger portion of your customer base to complete the survey. This will help you determine what your current customers like (or do not like) and determine ways to keep them satisfied customers. By completely understanding what you do to satisfy your current customers, you can use that knowledge to promote what you do best to potential customers.
4) Employee Safety
Employee safety can be extremely important depending upon the industry you operate in. Businesses in a physical setting like construction or manufacturing typically place extra emphasis on employee safety, but it can be equally important to put some attention to employee safety even in an office setting. No matter what your business does, there are always the potential for slipping hazards, back injuries from poor form during lifting or even repetitive motion that can lead to problems like carpal tunnel syndrome. Putting an emphasis on employee safety does not have to be exhaustive. It can be as simple as a weekly email and a monthly 15-minute meeting. Whatever schedule you come up with needs to be regular to show the importance you put in safety and the employees will more than likely follow suit.
Mitchell Sharp is a Marketing Associate for Workers Compensation Shop.com. Mitchell is a Missouri Boy and a Carolina Man. He has a deep passion for social media and content marketing. Mitchell would like to use his knowledge of these subjects to benefit small business owners.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.