Your business is rocking and rolling with money coming in. Or else you plan for money to be coming in – so you’re acting like you’re in business. But you get this creeping feeling that something might happen and you will awake from this entrepreneurial dream. You don’t want to lose this. You’ve worked too hard.
For this reason, you need to understand that protection tools work in layers. You know you need contracts, or maybe you’ve thought hard about your business formation, and perhaps a handful of you have thought about insurance.
Each of these tools do offer some protection – but they work best in layers.
Tool #1 Contracts
It really is a no-brainer in this day of litigious society that contracts are a must. Having proper lawyer-drafted contracts implemented in your business will help to inform customers of policies, provide hurdles to any issues a customer may have, and provide a legal document to be referenced in situations.
Tool #2 Liability Insurance
Next, you have a layer of a liability insurance policy. By having this layer, you can defer clients to the company to resolve any potential liability issues that arise. This frees you up to focus on your business and (hopefully) reduce costs to extinguish any “fires” that may come up.
Tool #3 Business Formation
The core layer would be your business formation choice. For example, choosing a Limited Liability Company divides the business and personal assets for protection. With the formation at the core, if customers get through the last two layers, then they have to engage in a legal transaction such as court or mediation for a resolution.
Take for example, you end up with an extremely unhappy client. You don’t have liability insurance but you were smart enough to form as an LLC; so when trying to settle the matter, you will have to go all the way into court to settle it. Whereas, if you had a liability insurance policy in place that covered the issue at hand, you may have been able to have it handled in a shorter amount of time with a lot less money.
The Sad Reality
Unfortunately, many will check the legal marks off and never revisit the tools again until it is too late. You need to set up a calendar reminder to revisit your contracts, disclaimers, insurance, and even your business formations on a regular basis. As your business grows, your legal needs grow.
I don’t say this as a lawyer…well, not only a lawyer, but as a business owner. I don’t want to lose everything I’ve worked for either.
If you are one of those that isn’t even to that point yet, make sure you get these tools in your tool belt before even taking clients.
If you think you have it on lock down, consider this–it is cheaper and easier to be protected by layers (and keep these layers up to date) than trying to scramble when an issue occurs.
And this is why you’re going to see much more information from me that will center on protection. My goal is to push preventive methods rather than “clean-up-on-aisle-four” methods.
Because the more protected you are, the more confident you will be. This will help you stand firm when clients are trying to steamroll you. It will give you the ability to discern which policies to relax in the name of customer service.