Chapter 12: Protect Your “Baby” and Yourself - Insurance, Crime, Taxes, Exit Strategy, and Ethics

Learning Objectives :1. Understand the

importance of protecting your assets through insurance

2. Explore insurance needs for your specific business

3. Investigate and initiate loss-prevention strategies for both internal and external crimes

4. Build awareness of cyber-crime issues

5. Recognize the need to file all tax forms in a timely manner

6. Prepare for your exit at the start7. Recognize that ethical behavior

is required of the owner before ethical behavior can be expected of the employees

8. Understand the daily ethical dilemmas entrepreneurs face

9. Learn seven steps to better decision making

10. Understand the importance of tax planning – not just tax filing

Insurance and Managing Risk

Identify the risks your business faces Work with a broker to determine what risks to

insure, which to assume and which to share Check into group policies Consider the following:

Probability & size of a potential loss Financial resources available to meet a loss Probability of lawsuits

You can reduce risk but must also assume it – don’t risk more than you can tolerate losing

Insurance Planning

Personal injury to employees & the general public Legal action stemming from hiring, firing, sexual

discrimination, libel & so on Loss to the business caused by the death or

disability of key employees or the owner Loss or damage of property Loss of income resulting from interruption of

business caused by damage to the firm’s operating assets

Business interruption against consequential losses Workers’ compensation Vehicle

Standard Coverage

1. Fire and general property insurance

2. Consequential loss insurance

3. Public liability insurance4. Business-interruption

insurance5. Crime insurance6. Malpractice insurance7. Errors and omissions

insurance8. Employment practices

liability insurance (EPLI)

9. Key person insurance.10. Product liability

insurance11. Disability insurance12. Health insurance for

employees13. Workers’ compensation

insurance14. Extra equipment

insurance15. Directors’ and officers’

liability insurance.16. Cyber-crime insurance17. Other

Action Step 50: Protect Your Venture

1. Network your way to a business insurance broker and/or your trade association

2. Read information online that focuses on your industry & make a list of questions

3. Review your insurance needs with your broker

4. Discover the cost of insuring your business for the first year & how insurance needs and costs will change as you grow

Employee Crime: Be Prepared – Take Preventative Steps

30% of small business failures attributed to employee theft Be prepared to prevent both internal and external crime Insurers offer specialists to work with industry-specific issues:

● Credit card fraud ● Theft of items from stockroom, layaways & displays● Check deception ● Computer fraud● Shoplifting ● Sabotage● Cyber crime ● Theft of private information● Cash mishandling● Manipulation of time card data● Fraudulent refunds ● Illegal use of company time● Counterfeit money ● Fraudulent expense reports● Fitting room theft● Sweethearting (discounts for family & friends)● Burglary ● Theft of trade secrets● Robbery ● Theft of intellectual property● Bomb threats

Credit Card Fraud: 5 Steps to Protect Your Business

Get all the information related to the credit card

Be wary of orders that use different “bill to” and “ship to” addresses

Watch out for unusually large next-day delivery orders

Do everything possible to validate the order before it is shipped

Take immediate steps to reduce damage if fraud is discovered

Cyber Concerns

Be vigilant in your protection of employee, customer and company data

Install appropriate software & train employees

Never stop reading about security issues Firms today face “reputational risk” Hire carefully – data theft by employees

pose a huge threat today Consider cyber-crime liability insurance

5 Reasons Cyber Security Matters to Small Businesses

Smaller companies are more likely to be attacked than bigger ones

Breaches are potentially business-ending events

Can you be sure you are properly controlling the access of your employees & business partners?

Attacks could ruin your company’s reputation Your company could be putting its best

customers at risk

10 Cyber Security Tips for Small Businesses

1. Train employees in security principles

2. Protect information, computers & networks from cyber attacks

3. Provide firewall security for your Internet connection

4. Create a mobile device action plan

5. Make backup copies of important business data & information

6. Control physical access to your computers & create user accounts for each employee

7. Secure your Wi-Fi networks

8. Employ best practices on payment cards

9. Limit employee access to data

10. Passwords & authentication

Risk Angles: Five Questions about Reputational Risk

Questions1. Is it really a bigger deal

today than 5 or 10 years ago?

2. Isn’t it really just a by-product of other processes and risks?

3. How much control do we really have over it?

4. Who typically “owns” it?

5. What’s the most common blind spot when it comes to addressing it today?

Answers1. Absolutely. Damage can

spread at lightning speed.2. Yes, but it is also its own

thing & it can ripple.3. Wrong word – strive for

“risk intelligence”4. It depends – bigger issue is

who’s on the hook for it?5. Organizations

underestimate the importance of their employees in managing it.

The Tax Man Cometh

IRS Pubs: “Tax Guides for Small Business” & “Starting a Business & Keeping Records”

Must consider state as well as federal taxes Income Taxes Self-Employment Taxes Employment Taxes Sales Taxes

Considerable fines for violation of tax laws

Action Step 51: Tax and Exit Strategy Planning

Review the tax material provided in the text

Make a list & print out tax forms you need Read through IRS Guides Make a list of questions – contact the IRS

or your accountant for the answers Review Action Steps 1-5 in Chapter 1 &

make appropriate changes Begin to develop your formal exit strategy

for your final Business Plan

Exit Strategy

Depends upon your goals May change over the years due to

business or personal issues Work with lawyers and accountants Consider an Employee Stock

Ownership Plan (ESOP) if you want to share your business with your employees

Business Ethics in a Global Marketplace

The Business World is Shrinking Keep cultural differences in mind

Find Common Ground Use translation if needed &

know the boundaries Be Accommodating

Recognize time differences & the need for info in other languages

Keep it Legal

Action Step 52: Access Ethical Positions & Design Your Venture’s Code of Conduct

Respond to questions in Ethical Issues for Entrepreneurs Have potential partners complete the questionnaire Identify problems & how you will work them out Do you want to be in business with your potential

partners? Discuss the Ethical Principles for Entrepreneurs & look

for areas of agreement and disagreement How will you solve ethical disagreements with partners? Review The Seven Step Path to Better Decisions How would your ethical decision making change if you

followed the steps? Develop your firm’s code of conduct

Ethics

You will be confronted with many ethical issues Ethical decision affect all your stakeholders Passion for Silence & Helping People with

Disabilities “What goes around comes around.” Remember the Golden Rule: “Treat others as you

want to be treated.” Rotary International’s Four-Way Test:

Is it the TRUTH? Is it FAIR to all concerned? Will it build GOODWILL and BETTER FRIENDSHIPS? Will it be BENEFICIAL to all concerned?

Ethical Principles for Entrepreneurs

1. Honesty2. Integrity3. Promise-Keeping

& Trustworthiness4. Loyalty5. Fairness6. Concern for

Others

7. Respect for Others

8. Law Abiding9. Commitment to

Excellence10. Leadership11. Reputation &

Morale12. Accountability

The Seven-Step Path to Better Decisions

1. Stop and Think2. Clarify Goals3. Determine Facts4. Develop Options5. Consider Consequences6. Choose7. Monitor and Modify

Think Points for Success

Protect your investment with insurance. Reduce the risk of employee theft and crime with

loss-prevention strategies. Find and hire an expert accountant and financial

advisor Pay taxes on time. Keep impeccable, organized records. They will help

you survive an audit & enhance your ability to sell your business.

Plan your exit strategy. Follow the golden rule.