We are coming up on year end, and it is natural to start thinking about conducting a review of your business to get ready for the new year ahead. Most people automatically think of reviewing taxes. That is good. But taxes are just one slice of the liability picture. You need to look at more.
As a small business owner, your personal assets may be at risk in the event of legal liability or even a downturn in your business. Some of the risks that you should be evaluating are:
- Economic and business environment risk - Look at external market conditions. Has anything changed or is it likely to change, in such a way to impact your cash flow, receivables, profit margins or customer orders? Has there been any major change in your suppliers or the competition? If you need to tighten your belt, it is always better to know sooner rather than later. You want as much time to plan and react as possible.
- Human resources policies - Are your policies up to date with current legal requirements? Are they in line with the marketplace? The employer/employee relationship is constantly evolving. If you haven’t looked at your HR policies for the past seven years, something is bound to be downright inaccurate when compared with the way you actually run your business today.
- Intellectual property - Do you know whether your property needs to be protected by a patent or trademark? With the proliferation of patent trolls and offshore trademark counterfeiters today, you have to be proactive to protect your rights.
- Employee benefits - Evaluate your employee benefit plans for competitiveness and also for costs of coverage. Employee benefits are a fluid and ever-changing area. It is rare for everything to remain the same from year to year. At the very least, expect health insurance premiums to go up.
- Environmental liabilities - Are you aware of the complex environmental laws and regulations that affect your business? Are your internal procedures in compliance? When was the last time you checked?
- Liability and property insurance - Are insurance coverages sufficient? Have they kept up with changes in your business? Be sure to look at both the types of coverage and the amounts. New exclusions from coverage and your prior year claims experience may require significant adjustments. A good insurance agent is invaluable.
These and many other questions should be the starting point for your year-end business review.
For a helpful guide of all the issues you should be looking at, check out “Small Business Guide to Risk Management.” This free book was put together by the Association of Small Business Development Centers and is by AIG Small Business. I recently picked up a copy of this book at an event but luckily found it is available online. Download Small Business Guide to Risk Management in PDF form.