3 Ways Business Owners Protect Themselves from Life’s Catastrophes
Running a business is a juggling act. You must keep all the balls in the air, so your business does not fold. These balls include costs, clients, expenses, family, your health, taxes, and a host of other small and large issues. Chances are, if you are a business owner, then you are an expert at managing the multiple levels of your business.
To keep these balls in the air, business owners must be prepared to hedge against unforeseen circumstances. If you want your company to survive, beware of “black swan events” or a black swan for short.
What is a Black Swan?
The term Black Swan was popularized by the financier-turned-author, Nassim Nicholas Taleb. Observing the 2008 fiscal crisis, he noted that some events were impossible to predict yet were catastrophic in nature when they did occur. In the context of running a business, a black swan event is something so unusual and unlikely that it is impossible for you to see it coming, yet has a catastrophic effect on your business.
As the definition indicates, black swans are impossible to predict. As a business owner, this means you must plan for the impossible. Of course, you cannot plan for every single eventuality. However, keeping in mind that a black swan can occur at any time will help you be in the right frame of mind when it does happen. Here we will look at three ways you can prepare for those unlikely black swan scenarios.
1 – Have Attorneys Ready on Standby
The most important thing to understand in preparing yourself for a crisis event is that the universe does not care about you or your business. The universe does not care if you are a family man, if you are honest, if you are ending world hunger, if you eat a vegan diet or if you are pious. It does not matter who you are, how good you are, or how skilled you are, when a black swan hits, it hits to destroy.
For a business, a black swan almost always means litigation of some sort. Let us use a very simple example. Suppose you are crossing the street and get hit by car. At the same time, someone gets injured on your business premises. Add to that, your employee gets involved in an auto accident while driving a company vehicle.
This is a typical black swan scenario where the universe converges against you. It is unpredictable but everything coming together could put you out of business. In this case you will need your personal injury lawyers and your company attorneys ready to go. You will also need representation in the other cases.
The last thing you want during such a situation is to have to keep running your company, while you are injured and have to go vet multiple attorneys. Lawyers are your most important defense in many of life’s most risky scenarios – having a vetted team ready is critical.
2 – Have Enough Money to Fire Clients
In the world of business, troublesome employees are not the only headache you deal with. You may have that one client who you just cannot please no matter what you do. In such a case, you may need to let them go.
This process, however, is not always easy. Many businesses run at such low efficiencies that they depend on each and every client. So then comes a black swan event.
During these periods, the number one thing a business needs is focus. There are countless examples of successful companies having to fire clients, drop departments and trim down in order to survive their respective black swan events. IBM, Xerox, and most recently, Sony, are all major companies that dropped entire departments and fired clients.
So you may be wondering, “How does firing a client help me grow my business?” As we mentioned above, every business has that one client that is hellish to deal with. That client depletes of you of your time, your emotional stamina, and your peace of mind – all critical resources that you need to handle catastrophes.
Simply put, firing that one horrible client will free up the resources you need to navigate your company through turbulent times.
3 – Have the Big Three Insurances
The ultimate black swan event does not involve your business directly – instead, it involves you personally. This scenario is entirely unpredictable. Losing an arm, being diagnosed with cancer, or worst of all, death.
The big three insurance policies you need are life insurance, health insurance, and auto insurance. With these three alone, you are protected from the most common cataclysmic life events.
Entrepreneurs are by nature a risky people. And for some reason, while most entrepreneurs do incredibly intelligent things, some do some not-so-intelligent things. One of those not so smart life choices is being under-insured. If you have the money, make sure you are fully protected.
As a pro-tip, there is a subtle nuance you need to know about your life insurance. What happens if you are in an accident where you lose a limb or your eye and survive? Your life insurance will not pay out, but you will still become disabled.
If you are extra risky and have dangerous hobbies such as riding motorcycles, going for long drives, scuba diving, surfing, etc. then you probably need AD&D on top of your life insurance. And if you are left wondering, what is accidental death and dismemberment insurance? – do not worry, because most people do not know about it either.
In short, it compensates you for dying in an accident, losing eyes, and losing limbs.
Consider a black swan scenario. You are a successful software developer. You get into an accident and lose your eyesight. Life insurance will not pay because you did not die. Health insurance will only pay for your medical bills. Auto insurance is unrelated.
Accidental death and dismemberment insurance, in this case, will pay. AD&D is important for those black swan events that take away your life or one or more of your limbs.
Black swans, while impossible to predict, can still be guarded against. Being cognizant of the possibility of a black swan occurring is the first step to securing your future.
Failing to plan accordingly will mean you are planning to fail when one does occur.