Accidents and crimes do happen, so it’s worth making sure your business won’t suffer in the case of loss.

For the most part, insuring the possessions of your business is much the same as insuring your personal possessions. Simply tot up what they are worth, get a quote, and if you suffer a loss, claim on the policy. But there’s a little more to it than that.

When it comes to the possessions of your business, insurers broadly divide the categories up into three separate areas: buildings, stock and business equipment.

Vehicle insurance is considered completely separate. Usually you can get a policy that covers everything, but it’s worth considering what’s involved in each.

And in these credit-tight times, financial institutions are finding it harder than ever to make any profit out of lending money.

So they’re searching around for something else, and insurance is right at the top of the list. For SMEs, this is fantastic news. The more institutions that want your business, the fiercer the competition. And this will hopefully mean better policies at lower prices.

Banks earn huge commissions from selling insurance to customers – often the bank you have your current account with will offer insurance, even though it is not the company that actually provides it – and these costs, often as much as 30 per cent of the premium, are sure to be passed on.

Buildings insurance

If you have a mortgage on your property – and in most cases if you have a business lease – this will be a compulsory product.

While the lender retains an interest in your property, it will expect you to protect it.

If your premises are burnt to the ground, repaying the mortgage will be the last thing on your mind, but it will be the first thing on the lender’s agenda.

There is no industry-wide definition of what buildings insurance comprises, but basically it is what you would leave behind if you metaphorically tipped it upside down. So in addition to the walls, windows and roof, this should include fitted kitchens and bathrooms. It should also cover any outbuildings, such as garages or sheds – although you need to inform your insurer of their existence.

Most insurers require you to set an insurable value for your property and this can be where problems arise. The insurable value is not the same as the value of the property – part of that is the land, which you will still own even if there is nothing left on it. This is true even for office blocks, as you still retain the right to use that particular space.

The figure that needs to be insured is the rebuild cost. This is what it would cost to return the property to its existing condition if it were completely destroyed. It’s much less than the value of the property, but it’s almost impossible for

non-insurance specialists to work out themselves. There are so many variables to consider – the type of materials, the location, surrounding buildings and so on.

Insurers nowadays don’t really expect you to put a figure on it. Many insurers nowadays will work out the figure for you, based on the location and type of the property, and how big it is. They will then guarantee to cover any claim if a disaster does take place.

Buildings insurance can be comparatively cheap. The most common causes of insurance claims is crime-related, and most burglars tend not to steal the fixtures and fittings.

What the premises are used for will be key – if you’re just insuring an office, you’re not going to have to pay too much, for example, but if it’s a factory where gas cylinders are kept, or a restaurant – with a high possibility of fire – then you’re going to be paying more. If you have a regular stream of customers coming on to the premises, that will add to the cost, as damage is more likely to happen.

There is also likely to be a higher price if you are the type of business that attracts criminals – your windows are less likely to be broken in a burglary if you are an estate agent compared to a jeweller, for example.

Contents insurance

While no-one is going to force you to take it out, only a fool would fore-go the security of contents insurance.

Contents insurance is supposed to cover everything to do with your business that that you use to run it – not what you sell. So computer equipment, fixtures and fittings in a shop, machinery in a factory and so on.

Virtually all contents policies nowadays are written on a ‘new for old’ basis. This means that if you claim for an item that has been lost or irreparably damaged, you will get the replacement value, not what the item was worth before the claim.

But insurance companies don’t like handing out cash to claimants; they believe it encourages fraud. What companies do is attempt to replace the items for you. To save money, they have agreements in place with major retailers to provide them with claimed items. So if, for example, your computer equipment was stolen, the insurer would request a list of the products and would acquire them on your behalf.

Stock

This is essentially everything you plan to sell as part of your business – whether it’s the contents of a shop or warehouse, or even the output of your factory. Again, the price of the policy will depend on the value of the stock you typically hold, but also its fragility and its attractiveness to crooks.

Again, jewellers are likely to pay more. It’s not only a good thing from a cost control point of view to maintain as low a base of stock as possible, it’s also going to make it less expensive to insure.

Business types

Some insurers don’t insure certain types of business. Restaurants often need specialist cover, as do hairdressers and bookmakers.

Even those that promise to insure all businesses will often load the premiums onto firms they’re not particularly keen on.

So it makes sense to shop around.

Specified items

If you have any particularly valuable items – the amount depends on the insurer, but check if anything you own is worth more than £1,500 – then these will have to be specified on the policy. You may be required to provide photographs or serial numbers of the items.

Cut costs

Your insurance policy will be priced according to the risk the insurer sees of having to pay out. So anything you can do to protect your business will reduce the cost of the policy. Most of these are security related – installing a burglar alarm or a window locks will lower the premium, for example. Different insurers have different criteria, so it’s worth contacting yours to see where you can make savings.

Bundling

While it is not always possible most insurers recommend that you take out your buildings and contents insurance together.

By doing so, you could save money because many companies offer discounts for taking out both products. But also, if one company insures both your building and your contents, there is far less chance that in the event of a claim, certain items slip through the net. Most companies have very similar definitions of what constitutes buildings cover and what comes under contents, but if there are any grey areas it could cause a lot of heartache when you least need it.

Whether you have one part time helper or a workforce of thousands, being an employer comes with a number of responsibilities – you have to make sure they are safe in the workplace, they are paid the right amount at the right time and they have all the rights that employees elsewhere in the country enjoy. You also have to make sure they – and you – are protected if things go wrong. Becoming an employer is a legal minefield, with huge penalties if you get it wrong. Follow our simple guide to ensure you stay on the right track.

• Hiring

When the time comes to take on new staff, the most important factor for you is to make sure you have the right person for the job – the right skills, the right attitude and, often the right personality. There are, however, other issues you need to take into account if you don’t want to end up on the wrong end of a lawsuit or prosecution. The most important issue here is discrimination.

It’s against the law to choose or refuse anyone based on race, gender, marital
status, sexual orientation or disability. All this needs to be considered before

you decide on the perfect candidate; any job adverts must be non-discriminatory and you need not only choose your new employee based solely on their ability, but you must be seen to be doing so too. Remember, once you have hired staff, you must have employers’ liability insurance.

• Salaries

Once you’ve made your hire, you need to pay them. Most full time employees must be paid on the Pay as You Earn (PAYE), where employers make the deductions for tax and national insurance and then pay HMRC directly. Businesses can register as an employer at the Revenue’s website.

How much you pay your staff is down to you, of course, but it must not be less than the legal minimum wage – £4.92 an hour for those aged 18-21 and £5.93 an hour for anyone older. The dates and times when you pay salaries should be set down in any employment contract, and make sure you don’t miss a payment – you could be held liable for any problems encountered by your employees, such as missed payments.

• Employment contracts

In theory you don’t have to provide staff with a written employment contract. But in practice, having one will protect both you and your employee. In it should give details of the duties and responsibilities of the employee, along with their rights.

You should include details of their salary, holiday entitlement, any benefits
such as a pension, notice period and – if your business has one – disciplinary and grievance procedures.

While employment contracts vary – an office worker will have different terms to a long distance lorry driver, for example – you don’t necessarily need to get the lawyers involved. Templates and example contracts are available online for free.

• Firing

Terminating a member of staff can be one of the most difficult jobs a business owner has. Aside from the emotional difficulty, and the impact on the morale of other staff, it’s a legal minefield.

If your member of staff has committed gross misconduct -committed a crime, or put other people in danger while at work, for example – then they can be summarily dismissed. But if you want to let someone go for poor performance, it’s a little more complicated.

The key here is to keep written records of everything you do. It’s important to be able to show you have tried to encourage your staff to improve their performance, and have warned them in advance of the potential consequences if they fail to do so.

There are thousands of cases in the UK each year where employees sue for unfair dismissal, and many of them, says employment lawyer Sam Allen, are down to lack of communication: “If it comes as a surprise to someone they are being let go for poor performance, they are much more likely to want to have their side of the story heard.”

I f your employees do anything that results in a legal claim while working for
you, your business could be held liable for any damages. Public liability insurance and potentially product liability insurance will help protect you from any claims.

• Health and safety

The Health and Safety at Work Act 1974 is the main piece of legislation employers need to consider. As an employer, you have a duty of care to your employees, which basically means the work environment must be safe, equipment must be checked, safe working practices must be implemented and materials are stored and used carefully.

You will also need to provide first aid facilities and have plans in place should an accident or emergency take place. Some accidents or emergencies will need to be reported to the HSE if they occur.

Even the best laid plans and the most comprehensive policies can’t always
protect you from things going wrong.

Thankfully there are a number of insurance policies that you can – in some cases must – take out that will mitigate some of the costs to your business in the event of a claim.

• Employers’ liability insurance

This is a legal requirement if you have employees, which is defined as someone who is working for you on your premises. It’s there to cover you if any employee claims for an injury or ill-health while working for you. This doesn’t necessarily just mean someone falling off a ladder or slipping on an icy surface; some of the biggest claims have arisen from problems nobody knew about at the time, such as exposure to asbestos or other harmful
chemicals. And as a result, the claims can go back decades – because the evidence of harm may take some time to come up, it’s worth keeping a record of who your insurer is for any given period.

• Public liability insurance

Over £1 billion a year is paid out in public liability insurance claims, and many small businesses go out of business because they are not covered. A public liability insurance policy will protect you from claims from members of the public who visit your premises – so if you have visitors to your
place of work, then this is a must. It will also cover you if you cause damage
to a third-party property while carrying out your business.

• Product liability insurance

If you manufacture, repair or adapt any products, then product liability insurance will protect you from any claims related to injury or damage as a result of a fault or flaw in the product. The price of a policy for this varies greatly, depending on the product in question – the greater the risk of
the product, or the more damage it could do, the more expensive it will be.

• Directors’ insurance

Just because you run a limited company doesn’t mean that you are immune from any potential claims. “It’s one of the areas that few businessmen know about and the repercussions can be huge,” says Tarling. Company directors and officers must comply with over 200 areas of statutory liability under the various Companies Acts, and can face personal costs if they are found to have acted improperly. This cover provides insurance for those who have inadvertently acted outside the rules and face penalty.

Over half (53 per cent) of British entrepreneurs put their business success down to their own innate talents which cannot be learnt or taught, according to new research* of 500 entrepreneurs. This compares to 13 per cent who believe that learnt skills or education have been the driver in launching their business idea.

A debate on the research findings by small business insurance provider Hiscox, attended by some of the country’s leading entrepreneurs and business experts reached the conclusion that entrepreneurship is more nature than nurture, although did also suggest that some key business skills can be learnt. The discussion also concluded that the current financial climate presents significant opportunities for aspiring entrepreneurs.

Hosted at the Royal Institution by science journalist Vivienne Parry, the Hiscox sponsored ‘nature or nurture’ debate saw Steve Ridgway, CEO of Virgin Atlantic Airways, Max McKeown, business author and strategic adviser, and Daniel T Jones, founder and Chairman of the Lean Enterprise Academy, argue what attributes they believe contribute to entrepreneurial success.

Entrepreneurship as an art

Max McKeown, supporting the nature side of the debate, said that entrepreneurship is an art, something that comes from a set of abilities that cannot be learnt. He also commented that entrepreneurs need innate qualities such as ambition in order to make the leap from having a great idea to actioning it: “Who’s more likely to succeed – someone with high skill and no ambition, or no skill and high ambition? If you’re an entrepreneur, you can hire as many skilled people for your business as you want.”

Hiscox’s research supports that view, with 23 per cent of entrepreneurs questioned stating they were not university educated and just 13 per cent believing business success is down to education or relevant experience. Respondents also listed innate attributes led by an analytical mind (81 per cent), followed by creativity (73 per cent), drive (66 per cent) and good communication skills (63 per cent) as key to business success.

Entrepreneurship as a science

But the research also acknowledged nurture as an influence: 88 per cent of entrepreneurs worked for another company before starting their own business and 30 per cent had studied business and management, showing that gaining competencies and experience within an established company can be an important part of business success. Professor Jones echoed the need for experience when debating for the side of nurture. He argued that entrepreneurs often fail at first, learning from their mistakes, and that some key entrepreneurial traits, for example problem solving, can be taught.

The lively discussion about the nature of entrepreneurship concluded with all panelists agreeing that post-recession is a time ripe for would-be entrepreneurs, citing successful companies Hyatt Hotels and MTV, which were born in similarly challenging economic times.

Professor Jones said that the recent downturn proved the current business model was broken: “Now is the time for entrepreneurs to really flourish”. Steve Ridgway commented that tough economic times always bring out business talent: “Entrepreneurs will go to hell and back if they believe in an idea.” Max McKeown echoed this thought, saying: “Entrepreneurs don’t believe the future is predictable – but they do believe that they can create the future themselves.”

Commenting on the debate, Alan Thomas, SME expert at Hiscox said: “One thing that’s clear is that it’s hard to package the profile of an entrepreneur into a ‘one size fits all’ format. While some people have all the required qualifications on paper, they may lack the innate abilities of a natural born risk taker or vice versa. It’s good to see that despite, or maybe because of, recent economic challenges, the spirit of entrepreneurship remains alive and well in this country.”

Hiscox insures more than 100,000 small businesses in the UK, offering a range of business products including public liability insurance and professional indemnity insurance.

The responsibilities that come with running a business may seem somewhat daunting at the start, but there are a number of insurance policies that can help you protect yourself and your business.

Running your own business may be an exciting and profitable enterprise, but along with the rewards come a number of responsibilities. And no matter how careful you may be, one slip could end up costing you and your company a fortune.

The growth in ‘no win, no fee’ lawyers means that more people are heading for litigation if they have suffered harm, and can put the blame on to a business. As most cases don’t go to court – they are settled by mutual agreement – there are few figures for the numbers of cases but, says the Association of British Insurers, they run into the tens of thousands each year.

Essentially, says Tim Lazenby, managing director of FSB Insurance Services at Towergate Riskline, you need to both legal and asset protection. “You build up your levels of protection as your business grows – there are certain policies you need to start with, but as the money starts to come in, it’s all about transferring the risk [from your business to the insurer].

Asset protection

Every small business will have an asset worth protecting, whether it’s your stock, your computer, or a large factory. The key policies you need to consider are:

Vehicle insurance: If you run vehicles, you have to have insurance, it’s the law. But it’s relatively easy to get yourself covered, and even businesses can spread the cost over a year. Check though that you won’t be charged interest if you want to pay monthly – what may look like the cheapest headline rate can swiftly come up costly if the premium is loaded. If you lease your vehicle, some providers will include insurance as part of the cost of the lease. And if you use it to carry your tools or equipment, make sure you empty them out at the end of each day – unless specified, your policy won’t cover anything left inside overnight.

Buildings insurance: If you own the property, you will definitely be responsible for insuring it, and it’s likely that if you lease premises, you’ll still need to do so – it’s usually a condition of the lease, or any finance secured on the property. The level of cover you need is not the value of the property, it’s the amount that it would cost to rebuild if it was completely destroyed – after all, the land would still be there, and that makes up a significant part of the value.

It’s virtually impossible for a layman to work out the rebuild cost; some insurance companies will work it out for you, or you may need to engage a surveyor to give you the information. But it’s worth getting it right – estimate too low, and you’ll be uninsured; too high and you’ll be paying too much for the premium.

Contents insurance: Whatever you keep within your premises – or anywhere else – should also be protected. While it’s unlikely to be a legal requirement, just think of how you would be able to run your business if you lost the tools you need to carry it out. It can be worthwhile to bundle the buildings and the contents insurance – in addition to any discounts you may get, it also protects you from items slipping through the net – those not covered by either policy. If you run your business from home, check your home insurance policy covers you – many don’t and you may need to look into getting extra cover.

Legal protection

Small business insurance policies can help you in the event of making a claim, but they don’t absolve you of responsibility. “Small businesses have a responsibility to their staff, their customers and their suppliers – if you don’t comply with the rules and regulations, it’s not just a civil claim you could encounter, you could also be liable for criminal charges,” says Malcolm Tarling from the ABI.

Here are the business liability insurance policies SMEs need to consider:

Employers’ Liability Insurance: This is a legal requirement if you have employees, which is defined as someone who is working for you on your premises. It’s there to cover you if any employee claims for an injury or ill-health while working for you. This doesn’t necessarily just mean someone falling off a ladder or slipping on an icy surface; some of the biggest claims have arisen from problems nobody knew about at the time, such as exposure to asbestos or other harmful chemicals. And as a result, the claims can go back decades – because the evidence of harm may take some time to come up, it’s worth keeping a record of who your insurer is for any given period.

“It’s a strict liability cover, that’s for anyone who works under your instruction,” says Lazenby. “You must have it and you must display the policy in the workplace. The minimum cover you are required to have is £5 million, though most policies will automatically offer £19 million.”

Public Liability Insurance: Over £1 billion a year is paid out in public liability insurance claims, and many small businesses go out of business because they are not covered. A public liability insurance policy will protect you from claims from members of the public who visit your premises – so if you have visitors to your place of work, then this is a must. It will also cover you if you cause damage to a third-party property while carrying out your business.

Product Liability Insurance: If you manufacture, repair or adapt any products, then product liability insurance will protect you from any claims related to injury or damage as a result of a fault or flaw in the product. The price of a policy for this varies greatly, depending on the product in question – the greater the risk of the product, or the more damage it could do, the more expensive it will be.

Directors’ and Officers’ Insurance: Just because you run a limited company doesn’t mean that you are immune from any potential claims. “It’s one of the areas that few businessmen know about and the repercussions can be huge,” says Tarling. Company directors and officers must comply with over 200 areas of statutory liability under the various Companies Acts, and can face personal costs if they are found to have acted improperly. This cover provides insurance for those who have inadvertently acted outside the rules and face penalty.

Business Protection

While the recent swine flu outbreak has not – yet – had the disastrous impact on British businesses that some predicted, there are plenty of unforeseen events that could cause businesses to struggle.

There are some estimates that 80 per cent of businesses with no business continuity plan fold in the aftermath of a major disaster. And while this could be something along the lines of a national emergency such as a terrorist attack or health epidemic, it could just as easily be something closer to home, for example the incapacity of a key member of the business. Or it could be something as simple – yet damaging – as a strike leaving you out of contact with your customers.

Putting a plan in place can not only help you arrange procedures for dealing with emergencies; it also provides a step-by-step guide for individuals to follow when they may be finding it difficult to make decisions – giving them a route to follow will help them work through the crisis.

“By developing a simple plan, a business continuity plan, you can protect your business to ensure that no matter what disaster strikes you are prepared and “Business as usual” is the only thing your customers and suppliers see,” says Colin Ive from SME Continuity.

Your first step, according to the Contingency Planning and Disaster Recovery Guide, is to prepare a list of all the potentially serious events that could happen. This doesn’t necessarily mean listing all the disasters that could befall you, but looking at the issues that would affect your business. So instead of listing swine flu, ebola or any other illness, the list would include something along the lines of staff shortages or key person unavailability.

For each potential issue, you need to come up with a process to follow – the key people involved, any suppliers that need to be contacted, a list of contractors who may be able to support you and, vitally, any insurance policies you can claim on.

While business insurance won’t be able to completely prevent any effects of a disaster, it can help to mitigate any costs you may incur. Key Man Insurance can provide a cash injection into a business in the event of the untimely death or incapacity of a specified member of staff. The funds can be used to offset any loss of revenue caused by that person’s absence, or to recruit or train a new person in that position.
If your business is hit hard, and has to stop trading for a short period, Business Interruption insurance can help to tide you over. It’s a short term solution for a few weeks and is there specifically for if you have to stop trading due to factors outside your control – it doesn’t cover a downturn in trading conditions.

If the emergency is a bit closer to home, public liability insurance and employers’ liability insurance will protect you from claims for issues that arise on your premises. We live in a culture of litigation and if an injury or damage could be found to be your responsibility, then expect a hefty bill.

Costs

For all types of cover, the cost of the insurance will depend on the business you are in, and your and your company’s claims experience. For example, an office based business will play less than a firm supplying parts to the airline industry.

Lazenby, who represents a broker, says that independent advice is vital for small businesses. “There are niche products available for specific businesses, which may be difficult to find, and only a specialist will be able to ensure you have exactly the cover you need.

What is remote data back up?

It’s essentially an insurance policy for your company’s day-to-day and organisational information. As you work, your data is sent over a secure line to a protected databank, and can be retrieved in part or in whole, at a later date.

You have a 1 in 25 chance of having your laptop stolen, broken or destroyed, every year.

No matter how careful you are, it can and does still happen. When an MI5 agent’s laptop was stolen in 2009, the counterintelligence agency assured the public that the data was encrypted. Aside from password protecting and backing up data, it’s a good lesson to use a virtual private network (VPN). The laptop would act as a terminal, not holding vital data as it would securely log-in to the company’s network after authentication.

50 per cent of critical corporate data is stored unprotected on desktops and laptops.

Without password protection or even encryption of the data, the possibilities of damage aren’t just caused by undercover spies and petty thieves, but users on a network with access to files in the common drives.

The cost and time to recover a typical SME’s data.

One Megabyte (MB) is about 500 pages of text. With this in mind, think of the costs:
19 days and £10,700 to recreate just 20 MB of lost sales data
21 days and £12,000 to recreate just 20 MB of lost accounting data
42 days and £61,000 to recreate just 20 MB of lost engineering data

10 years later and 500 times larger…

Did you know your computer stores 500 times more data compared to 10 years ago? This increased capacity amplifies the impact of data loss. If your company uses computers and servers older than five years old, with today’s demands on the hard drive and CPU, the chances of disk failure are higher.

Only 34 per cent of companies actually test their tape backup.

Of the 34 per cent of companies that test their tape backup, 45 per cent find failures in recovering data. Think of the 66 per cent of companies that have never tested the system they trust to recover their company from disaster. When was the last time you checked tape drive?

60 per cent of SMEs collapse after losing their data.

According to a recent report by the National Computer Security Association, within six months, 60 per cent of SMEs dissolve after permanently losing their data. It’s a sad and avoidable statistic that can be combatted with a disaster recovery / business continuity plan.

Only one third of companies have a disaster recovery plan.

Does your company have one? It should form part of your systems and training process within the company. You can start today by jotting down the following considerations: how can the company continue to operate without data (do you have backup, printouts, etc?); what information is essential and what can be replaced?; how much money does the company lose every day it’s down?; How can you decrease the likelihood of a disaster (how often is the equipment checked and tested)? What steps should you take to resume business as normal after a flood, server failure, etc? Remember, essential data is more than just documents and spreadsheets. Think of the configuration settings, user names, passwords, serial codes and licenses, to name a few.

Tape backup went out with Windows 98.

It’s widely agreed by businesses to be unreliable, prone to failure and not secure. Added to this, how often is the tape changed, duplicated for contingency, taken off site, stored in a secure place, password protected and tested? An automated off-site online backup system also removes the chances of human errors.

66 per cent of small businesses are worried about their disaster recovery plan.

The 66 per cent of small businesses that have a disaster recovery plan and data backup are worried that it has significant vulnerabilities. The concerns include equipment reliability, security of data, and staff. It’s not wise to make one person responsible for the entire recovery of your IT infrastructure. If they were to leave or go on holiday, it would cost your company a lot in wasted time and money.

22 per cent of computer users would like to back up their data.

22 per cent of computer users would like to backup their data and won’t get around to it. With over 17years experience in writing disaster recovery plans for our clients, we know the best time to back up your data will always be now.

Research supplied by On Line Computing

Your first start should be your local Business Link. This is a Government agency, organised regionally, that provides information and support for all small businesses – whether they are start-ups, established companies or firms looking to expand. It’s particularly strong on the administrative side of running a SME, with guidance on taxation, employment, finance and regulations. But it also has plenty of useful tips on marketing, international trade and grants, and runs local events that provide advice and networking opportunities.

The Federation of Small Businesses is a member organisation that campaigns on behalf of SMEs. It promotes the interests of small businesses in Parliament and in the media, but it also gives its members a range of benefits. Members are entitled to legal information, and can download templates of legal documents.

Members also get tax advice and there are a number of special deals you can access when it comes to banking, loans and credit cards. “Our purpose is supporting small businesses, and in addition to our lobbying work, we’re always looking for ways to give our members more help,” says a spokesman for the FSB.

It’s also worth visiting the websites of the major banks; they all offer accounts and services to small businesses, and many of them have plenty of advice to companies, which is available whether you are a customer or not. Lloyds and HSBC have two of the better websites, but most will have something of interest. Coverzones has plenty of useful and easy to understand information on specific insurance policies that small businesses need to consider, including laibility and indemnity cover.

As part of the Government’s long-term strategy to get more of its services online, there is now a wealth of useful sources of information for small businesses, many of them available through Direct.gov. The site is generally set up for individuals, so if you’re a sole trader then you can receive guidance on your rights and responsibilities, as well as information on tax and benefits. For larger companies, the taxman will be able to explain all about VAT, corporation tax, employers’ tax and the like. It’s particularly useful for companies undertaking new ventures, such as employing someone for the first time or selling products and services overseas – each of these come with potential liabilities so it’s a good place to start if you’re considering such a move.

The Department for Business, Innovation and Skills concentrates mainly on the regulatory side of running a small business. The site is currently being updated, so at the moment can be a little difficult to navigate, but if you can find it there’s plenty of help available.

There are some estimates that 80 per cent of businesses with no business continuity plan fold in the aftermath of a major disaster. And while this could be something along the lines of a national emergency such as a terrorist attack or health epidemic, it could just as easily be something closer to home, for example the incapacity of a key member of the business. Or it could be something as simple – yet damaging – as a strike leaving you out of contact with your customers.

Putting a plan in place can not only help you arrange procedures for dealing with emergencies; it also provides a step-by-step guide for individuals to follow when they may be finding it difficult to make decisions – giving them a route to follow will help them work through the crisis.

“By developing a simple plan, a business continuity plan, you can protect your business to ensure that no matter what disaster strikes you are prepared and “Business as usual” is the only thing your customers and suppliers see,” says Colin Ive from SME Continuity.

Your first step, according to the Contingency Planning and Disaster Recovery Guide, is to prepare a list of all the potentially serious events that could happen. This doesn’t necessarily mean listing all the disasters that could befall you, but looking at the issues that would affect your business. So instead of listing swine flu, ebola or any other illness, the list would include something along the lines of staff shortages or key person unavailability.

For each potential issue, you need to come up with a process to follow – the key people involved, any suppliers that need to be contacted, a list of contractors who may be able to support you and, vitally, any insurance policies you can claim on.

While business insurance won’t be able to completely prevent any effects of a disaster, it can help to mitigate any costs you may incur. Key Man Insurance can provide a cash injection into a business in the event of the untimely death or incapacity of a specified member of staff. The funds can be used to offset any loss of revenue caused by that person’s absence, or to recruit or train a new person in that position.
If your business is hit hard, and has to stop trading for a short period, Business Interruption insurance can help to tide you over. It’s a short term solution for a few weeks and is there specifically for if you have to stop trading due to factors outside your control – it doesn’t cover a downturn in trading conditions.

If the emergency is a bit closer to home, public liability insurance and employers’ liability insurance will protect you from claims for issues that arise on your premises. We live in a culture of litigation and if an injury or damage could be found to be your responsibility, then expect a hefty bill.

But there are no guarantees of success. A significant number of new ventures never reach their second birthday, and failure can affect your personal finances significantly.

So you need to do some homework before you risk your money. Here, we give you ten top tips to get on the right track from the start.

1. Focus on your product

Whatever your business, you need to make sure you really know what you’re doing. Who else is in the market? If there’s plenty of competition, what are you doing to make your business stand out? If you’ve found a niche – either a product that doesn’t exist, or a service not available locally – think about why nobody else is doing it. There may be a good reason for it not being available.

2. What kind of company are you?

“Deciding on what type of company you set up as is key,” says a spokesperson for the Federation of Small Businesses. “It affects the kind of finance you get to work with, the roles and responsibilities of the owners and your tax status.” For start-ups, there are effectively three main options – a sole trader, a limited partnership or a limited company. Each has its own benefits and disadvantages, and it’s well-worth doing some research on each to see what is best for you.

3. Which bank?

Despite the current economic turmoil, banks are still keen for business from start-ups, and many offer a range of incentives. While the benefits of free banking for a year or cheap initial overdrafts may seem vital, it’s more important to look at the long-term value, so compare the fees and charges once your deal period ends before you take the plunge.

4. Other financial services

No matter which bank you end up with, you don’t have to take all the products you need with it. If you need a small business insurance quote or a loan rate, compare the prices of the whole market to get the best deal.

5. Check your liabilities

As a business owner, you have responsibilities to your customers, your employees and your suppliers. If you fail in those responsibilities, you could be held liable for any injuries or damage that result. Make sure you have liability insurance in place to cover yourself against any claims.

6. Take advice

You can’t be an instant expert in all areas of running your business, so don’t be afraid to ask for help. Professional groups, such as your bank, will be able to give you information and advice on some areas, but it never hurts to canvas friends and family for their tips.

7. Don’t ignore the paperwork

There are legal implications for businesses that don’t keep up with their administration, but a disorganised approach to your paperwork means that you will miss opportunities and fail to spot any potential obstacles ahead.

8. Know the law

All businesses are subject to certain laws, and there will also be rules and regulations specific to what you do. Make sure you keep within the rules – the penalties can be huge and your reputation may never recover.

9. Get the marketing right

Understand where your potential customers are and build up a strategy to attract them – they’re unlikely to come to you. “The best strategies are usually the simplest, so when setting your marketing strategy make it achievable and ensure it fits within your budget,” says Julia Payne, co-founder of The Edge Business Club.

10 Don’t give up!

There will be obstacles and you’ll have good and bad days, but building up a new business is always going to be hard work and the biggest successes tend to come from the businesspeople who try the hardest.

Alongside this, a worrying number of businesses are looking to reduce or cut out insurance cover altogether as the recession bites. In the last year, around 15 per cent have considered cutting back on their insurance while five per cent have already cut back their level of insurance cover. When it comes to making cuts to save money, reducing the level of insurance cover is almost as likely to be a target as the company’s tea and coffee (with 35 per cent and 39 per cent respectively).

However, AXA warns this is a dangerous false economy as 13 per cent of businesses have less than £1,000 disposable cash and 48 per cent have less than £10,000. This means that without proper insurance, companies would be left extremely vulnerable in the event of a claim – which around one in nine businesses are likely to make each year. Average claims costs for the three most common claims are around £49k for business interruption, £36k for fire and £3.5k for theft.

(Mis)understanding insurance

The research carried out among hundreds of British businesses across all sectors shows that ignorance is rife. Aside from nearly two thirds not understanding their legal obligations in relation to employers’ liability cover, only 11 per cent of employers understand that if a company van or other vehicle is made available to employees then the employer is legally obliged to insure it. Only 37 per cent understand completely what premises insurance is for while this figure drops to 26 per cent for equipment and contents and 30 per cent for public liability.

Business Interruption (BI) cover, which will pay out if you are unable to operate as normal or have to close your business due to an insurable event, was misunderstood with nearly a third (31 per cent) having no or little understanding and 15 per cent wrongly thinking that it is legally compulsory. 14 per cent wrongly think that BI is available if employees can’t get to work because of severe weather, and only 24 per cent realised that BI could cover you if you had to close your business because of a power cut . Seven per cent also wrongly believed that they’d be covered if they had to shut their business because employees got swine flu and six per cent if business was lost because of the recession.

Less than half of employers have read their insurance documentation (49 per cent) and only 23 per cent keep it in a secure filing system either on or off site. Four per cent of employers admitted to not having a clue on what they are actually covered for.

Employee viewpoint

Despite the fact that employers have gaps in their understanding, 89 per cent of employees were aware of insurance covering them for accidents at work, although over a third (36 per cent) had never been given any information about their employer’s insurance programme. AXA advocates that employers continue to prominently display their Employers’ Liability Certificate as well as making this available electronically.

Four per cent wrongly believed they’d be covered for discriminatory behaviour from colleagues and three per cent for accidents on the way to and from work.

Doug Barnett, head of customer risk management at AXA says: “These statistics should be a wake up call to all businesses and the insurance industry alike. With the economy as precariously positioned as it is at the moment, the last thing needed is more businesses needlessly going to the wall because they are not properly insured.

“We have taken the findings of this research very seriously and have produced materials that can be used by AXA to help get our message across to business owners and management that insurance is an absolutely vital component of any successful business.”