There is certainly a cost to doing business and, if you aren’t careful, those costs can quickly become more than manageable. Needless to say, this is not a position you want to find yourself in as a small business owner. Preventing business interruption and keeping costs low can be a delicate balance, especially for the unprepared. Don’t put yourself between a rock, high maintenance costs, and business interruption—set yourself up for success with small business insurance.
What is the Cost of Business Maintenance?
Sometimes, it seems like there are never-ending problems and even fewer solutions. Old equipment, building upgrades, and persistent maintenance can eat away at your small business’s financial padding. While maintenance is certainly necessary, small business insurance can help offset the high costs associated with upkeep.
This is how.
- Small business insurance covers equipment theft, vandalism, failure, and costs you would incur without the right coverage. This is not to say that you should not perform regular maintenance on your assets, because you absolutely should, but small business insurance can protect you from the large replacement costs in covered events.
- Property coverage can ensure that your building is covered in the event of a natural disaster or crime. These costs would require a capital expenditure and likely close a business without insurance.
- Business insurance acts as a financial buffer to large costs that could otherwise be devastating. Large maintenance costs associated with breakdowns are mitigated with the right policy.
What is the Cost of Business Interruption?
The cost of business interruption can be high, so high at times that reopening isn’t possible. This formula can help you calculate the financial impact of business interruption.
- (Lost Revenue - Saved Expenses) + Extra Expenses
- Lost revenue is the amount you would have made before the interruption, or your daily approximate revenue.
- Saved expense is the fluctuating cost of items you would have had to purchase to stay operational, such as gas or energy costs.
- Extra expense is the amount you’ll need due to unforeseen circumstances, such as the cost of storage for items that can no longer be in your building after an incident occurs.
Business Interruption Example
- This is a real-life example of what a landscaping business might face during a business interruption.
- A landscaping business makes an average of $20,000 per day.
- They spend an average of $1,000 per day on items such as gas, dirt, landscaping supplies, and approximately $500 a day (with 4 employees).
- Due to a fire, all items now must be stored in a facility at a cost of $200 per day.
- ($20,000 - $3,000) + $200 = $17,200
- Now multiply that number by the number of days your small business is down, and you can see how business interruption can be a threat to your company.
Small Business Insurance Options
Small businesses can choose from a variety of insurance policy options to help offset the affects of business interruption and provide coverage for loss of use, driving down the costs you might incur when it comes to extra expenses. You can adjust premium costs to meet your business’s budget and help ensure you can operate when an incident occurs. Make sure to match your level of risk and investment with the right amount of coverage.
Business Interruption Insurance
This insurance can help protect your business, its assets, and cover extra expenses should an incident occur. Hopefully, incidents are small and manageable, but in the event that they aren’t, business interruption insurance can protect your finances and make sure you can reopen your doors when the time comes.
Business Income Insurance
Another form of insurance that could help protect your small business is business income insurance. This allows small business owners protection from a lack of income and can help fill the financial gap left by an absence of income.
Business Umbrella Insurance
This policy provides extended coverage beyond your normal liability. Should a catastrophic loss occur, business umbrella insurance picks up where your liability coverage drops, making it easier to recover from disaster. It can be helpful in situations where you are liable for expenses such as medical bills, damages associated with lawsuits, and attorney costs.
Don’t drown in the maintenance and interruption downpour; get the right coverage for your business.