Golden Bear Insuance Company

Risk Management for Small Business Owners

Running a business is hard. As an owner, you’re focused on serving customers, growing your business and protecting your livelihood, all at once. Although most small business owners know that they should engage in some sort of risk management to protect their businesses, many of them don’t know how to get started, or exactly what risk management entails.

Prior to embarking on my insurance career some 15 years ago, I opened my own Italian restaurant, Florentina’s Pizza and Pasta. So, I understand the challenges of being a business owner first hand. I know how difficult it can be to comprehend all of the risks against a business and know how to mitigate them. Luckily, I was fortunate enough to have a great insurance agent, Cliff, who took the time to understand my business and work with me to put together an appropriate slate of insurance policies to manage my risk.

Cliff did a great job of explaining the various aspects of risk management and made my experience as a first-time business owner less stressful knowing I had taken the proper steps to protect Florentina’s.

Let’s take a walk down memory lane as I describe how I put a proper risk management program in place to protect my restaurant. My hope is that this will give you a sense of how best to protect your venture as well.

Florentina’s sat at the corner of 8th Street and Polasky Avenue in Clovis. Two-thousand square feet in a wood-frame, strip center building with floor to ceiling windows around about twothirds of the perimeter. Inside the kitchen were two Montague pizza ovens, lined with brick and running on natural gas. Adjacent to the ovens was a four burner Wolf gas range. The usual assortment of free-standing refrigeration units accompanied the 10-square-foot walk-in refrigerator. The dining room had 15 tables and we could seat 60-75 people.

Now that you have a lay of the land, let’s start from the top and evaluate the loss exposures that needed evaluation:

  • To operate the restaurant, I needed to hire employees (those dishes weren’t going to wash themselves). This meant that I needed workers’ compensation insurance to protect my business in the event workers were injured on the premises. When purchasing a workers comp policy, consider the various operations of the business and anticipated payroll to define your policy limits
  • The next piece of the risk management puzzle is related to property. This included ovens, dough mixers, cash registers, etc. After all, we needed a place to make the pizzas or we weren’t going to stay in business. Keeping in mind the financial strain it would put on me as an individual or the business if we had to repurchase all those items again out of our savings account in the event of a fire or a flood, it was imperative that we took out a policy to cover the various equipment necessary to run the business. Cliff was very helpful in guiding the process. He had me create a list of the key pieces of equipment, and estimates of how much these items would cost, to help develop the proper coverage limit.
  • This leads to the next piece of coverage, which was a struggle for me at first – general and excess liability. I had to consider all possible scenarios that could happen as a result of operating Florentina’s for which I might be held liable. Things such as a chipped tooth on an olive pit, food poisoning, perhaps someone had an allergic reaction or a trip and fall, etc. Although a daunting exercise, outlining potential liabilities not only helped me understand how much coverage I would need, it also provided the opportunity to develop processes that would ultimately help minimize the risk of those occurrences taking place.

Being a business owner is tough, and understanding all the risks posed to your business can be even harder. For those of you not fortunate enough to have a Cliff by your side, fear not, you can still be a great risk manager! You have it within you, and the aforementioned tips can serve as a framework as you evaluate the best way to protect your business.

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