Inside Small Business | Small Business & Home Business Marketing

Replace Your Lost Benefits When You Start Your Own Business

John Ingrisano

Congratulations!  Whether you’re embarking on a one-person operation with world headquarters in the back bedroom, or founding a company with a payroll that seems bigger than the California state budget — there is nothing that compares to the thrill and terror of working for yourself.

Entrepreneurship presents great opportunities.  However, before you hang out your shingle, keep in mind that you need to manage your risk and provide those employee benefits you left behind at your old job.

Risk management can help tip the odds in your favor.  When you left your previous job to go into business for yourself, you also left behind employer-provided benefits.  If you haven’t already replaced these important “perks,” you should do so now.  Specifically:

• Make sure you have adequate life insurance to protect your company’s greatest asset — YOU! Forget the one- or two-times earnings formula your old employer used to determine how much life insurance you received. Obtain enough now to assure your family’s financial dignity if you die prematurely. Use life insurance as a risk management tool to protect their standard of living. Think big, as in several hundred thousand, perhaps even a million dollars of coverage.

Also, if you are like most new business owners, you depend on credit.  When most new businesses borrow money, it is not uncommon for lenders to require a personal guarantee.  If you died with an outstanding debt, your family could become responsible for repaying it.  Life insurance can help pay off those obligations.

• Don’t overlook disability income insurance. If you become ill or are injured, how long could your business go on without you? How long could you continue providing for your family if you were not able to work? Disability insurance can fill that need.

• Make sure you have quality healthcare benefits. With healthcare costs climbing relentlessly, business owners can be tempted to cut corners or go bare. Don’t! A quality healthcare plan can help protect you and your family by controlling the financial risks that can accompany an accident or illness. Plus, if you have employees, medical coverage helps attract and retain quality people.

Shop around for the best coverage.  Also, look into Health Savings Accounts.  With an HSA, you can stash money in an account, deduct your contributions, and use the money to pay routine medical expenses.  The account works in conjunction with a catastrophic care, high-deductible health insurance policy that is a lot less expensive than full-benefit policies.

• Set up your qualified retirement plan to help guarantee your future. If you are in solo business, you can establish a SEP (Simplified Employee Pension), plus make contributions into an IRA. Or if you have employees, you can also participate in a profit sharing or pension plan.

• Insure your business against the loss of key employees. If you have key employees or co-owners, key employee life insurance. — owned by and payable to the company — can soften the financial blow to your business if a key person dies.

There’s a lot to think about, and one thing is certain — as a new business owner, you are busy.  It is sometimes difficult to know which details to tackle first.  However, while your insurance and other risk management programs may not show up as one of the day-to-day challenges for your business, they are critically important behind-the-scenes players to help assure your long-term success.

There’s an old saying that goes: Take care of your business, and your business will take care of you.  Have fun.  Work hard.  Take time for your family.  And take care of your business by effectively managing your risk.

- JRIngrisano, The Freestyle Entrepreneur

*John R. Ingrisano is a business journalist, marketing strategist, sales trainer and public speaker.  He is also the author of hundreds of business-related articles and several books, including The Back to Basics Book of Selling, now in its third printing.  His clients include New York Life, Securian Financial, OneAmerica, and several dozen local, national and multi-national companies.For more information, visit www.TheFreestyleEntrepreneur.com, or contact him by email at john@theFreestyleEntrepreneur.com or by phone at (920) 559-3722.   

Posted on Tuesday, January 6th, 2009 at 11:28 am and is filed under Marketing, Small Business. You can follow any responses to this entry through the RSS 2.0 feed.