Who would you rather have teach you how to play golf - Tiger Woods or Warren Buffet? Who would you rather have teach you about investing - Warren Buffet or Martha Stewart? I think you get the idea. When you have to ask a question about protecting your business, you need to ask the right person. That is why I am always amazed when someone tells me about legal advice they received from their brother - who is a commercial pilot. Or they tell me about the tax advice they received from their uncle - who is a chiropractor.
RULE ONE: We discussed the first rule of protecting your business - establish financial controls - in the first posting on the subject.
RULE TWO: The second rule - build RELATIONSHIPS with "the big four" was discussed in the last article. We are now ready to discuss each of the big four. Let's start with your attorney.
RULE THREE: Never sign or publish unless your attorney reads it first. I learned many years ago that it is much cheaper to pay your attorney to review a contract BEFORE you sign it than to try to get out of the contract after you have signed it. ......and there are a lot less headaches. The same is true for anything you publish such as policy manuals, advertisements, etc. When I wrote my first employee handbook, I sent it to my attorney before I distributed it to the employees. It came back to me with more red marks on it than my 9th grade term paper. When you have built a relationship with your attorney, he or she knows what your objectives are, what you want to accomplish with marketing, hiring etc. With that knowledge, he or she can be much more effective when reviewing contacts, publications, or any legal documents.
RULE FOUR: Don't buy, sell or file taxes without talking to your CPA. Of course I am not taking about buying copier paper. I am talking about major purchases, sales, expansions, etc. Tax planning is important. Most people think of their CPA only in terms of filing the tax return -and filing is certainly important. I stopped filing my own taxes as soon as I owned a business. However, tax planning is just as important. If you want to protect your business against large tax liabilities, let your CPA work with you on tax planning. You don't start tax planning on February 1, 2009 because you have to file on March 15, 2009. You start tax planning on day one of your fiscal year. You constantly keep your CPA informed on your intentions to buy, sell, divide, combine, etc. Once again, if your CPA is totally familiar with your business and your objectives, he or she will be able to do a better job of helping you plan so you can protect your business from large tax liabilities.
RULE FIVE: Don't hide from your banker. Make sure your banker always knows your financial position. Depending on the type of business you have, you may want to give your banker your financial statements, monthly, quarterly, or semi-annually. Many business owners are afraid to ask their banker for help. A good business banker who specializes in your size and type of business can be a great help to you. They want a win-win situation. Just because you are short of cash doesn't mean you are running your business poorly and need to hide from your banker. Many well-run, growing businesses run short of cash. Growth has a way of causing cash shortages. Anyone who has had to buy inventory or equipment to expand their business knows exactly what I mean.
Once again, that is why it is important to keep your banker informed when you don't need money. Thus, when you do have a need for cash, your banker will know your business and be able to provide what you need quickly. He or she will also be able to recommend the best form of financing for your situation.
RULE SIX: Always ask, "How am I vulnerable?" We all know that we need property & casualty insurance and we know that we need liability and worker's compensation insurance. What we don't know - because we are not insurance experts - is under what circumstances are we covered? Your employee is going to lunch. You ask her to stop at the post office on her way back and buy a roll of stamps. Pulling out of the post office parking lot, she hits another car and injures the driver. It is your employee's fault. Is your business liable? You're playing golf with a customer and discussing business. You hit a shot that hits a golfer in the next fairway. Can your business be sued? You encourage your employees to volunteer for a non-profit organization that is having a fund-raising race. Because of your encouragement, an employee participates in the race and is hit by a car. Is your business liable?
These are everyday examples of real life situations. You have liability insurance but do you need special coverage for special situations such as these? You need to review these and other things that you do and then discuss them with your insurance agent. Does your agent really know your business and how you operate? Don't simply renew the insurance policy you had last year. Don't wait until renewal time to discuss your business with your agent. Develop a relationship and keep your agent informed so he or she can give you the advice that will protect your business.
Please feel free to post your comments - whether you agree or disagree. One of the objectives of this blog is to get everyone thinking and analyzing. Thanks for visiting this site.
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