5 Things Freelancers and Small Business Owners Need to Know to Secure Their Businesses
Small Businesses and small business owners running them are the lifeblood of the American economy, making up 85 percent of all businesses in the United States, according to the Small Business Administration.
As a freelancer or small business owner, you know how much effort, energy, and work has gone into starting and running your business. You’re also aware that freelancers and small businesses are continually exposed to risks that threaten the continued success and longevity of a business.
Risk is impossible to avoid, no matter how careful and meticulous you are. Failing to protect against an unexpected or unavoidable incident may lead to bankruptcy, insolvency, and the end of everything you’ve worked so hard to build.
Fortunately, freelancers and small business owners can secure their business by following 5 simple pieces of advice.
Secure your data
Data collected by freelancers and small businesses represent a valuable currency to unscrupulous thieves, hackers, and other criminals. As a result, failing to secure your data, credit and debit card numbers, Social Security numbers, names, addresses, dates of birth, and other personally identifiable information is a significant liability.
Professional, healthcare, and finance have been the most targeted industries
What can freelancers and small businesses do to protect their data?
The U.S. Chamber of Commerce recommends:
- Securing your servers with firewalls, off-site backups, strong encryption and limited access
- Scanning emails for malware and phishing attempts and training employees how to identify and avoid suspicious emails, dangerous attachments, and questionable links
- Using complex passwords, frequently changing passwords, and implementing multi-factor authentication (password management tools can simplify many of these processes)
- Installing and using anti-virus and anti-malware software with the most up-to-date versions.
- Working with qualified IT and cybersecurity professionals, whether in-house or outsourced.
- Securing your data takes some initial effort and consistent vigilance, but it’s a small price to pay compared to the costly ramifications of a data breach and resulting litigation.
Protect your work
Freelancers and small businesses are often hired to produce deliverables for or provide a valuable service to their clients and customers. Without a contract or written agreement in place, you may fall victim to:
- Project scope creeps that expand out of control
- Debate about ownership or copyright of a completed deliverable
- Nebulous payment terms, amounts, and specified milestones
- Questions of liability and responsibility
- Abstract or changing deadlines
- Hold harmless agreements not properly drafted.
In short, you may spend heaps of time, effort, and money producing a product or providing a service, only for a third party to consistently ask for changes, fail to pay (or pay on time), assume copyright of the completed product, or terminate or lengthen the service term beyond what you consider reasonable.
Protect your work by putting a contract or service agreement into place that outlines, in specific terms:
- The product or service you’re providing
- The amount and frequency of payment (including due dates and late fees)
- Which party takes ownership of any materials or final deliverables (and when)
- When or for how long the service takes place
- How or when the contract or agreement is concluded or terminated
A properly written contract or service agreement protects all parties by spelling out everyone’s obligations for one another.
If a client requests alterations to a product you’ve already completed, you have a document that defines exactly what was originally requested or how you can adjust.
And if either party fails to deliver what was promised, a contract may make enforcement and seeking a legal remedy.
Though there are many freely available contract templates available to customize, consider hiring an attorney to draft a contract to your exact specifications or review an existing contract carefully before signing it.
Manage your money
Freelancers and small business owners shouldn’t discount money management as an afterthought. It’s a skill that needs to be developed, practiced, and embedded in your day-to-day business operations. Without proper money management, you run the risk of closing up shop and even impacting your personal life.
In addition to enforcing the terms of your contracts, make sure you:
- Set competitive rates, be awareness of your competition and revise estimates them on a regular basis (at least once per year)
- Create (and follow) a budget
- Record your income and expenses (or outsource this task to a bookkeeper)
- Properly categorizing all expenses.
- Separate your bank accounts (keep business transactions separate from your personal transactions)
- Put money into savings (set money aside for taxes and an emergency fund equivalent to three to six months of operating expenses)
- Track invoices and payments owed to your business and use reliable up-to-date software.
- Pay bills, invoices, vendors, and payroll on time
If money management isn’t your forte or simply eats up too much of your time consider working with an accountant who can help you set up the tools and processes needed to manage your freelance or small business finances. Alternatively, hire an accountant to handle your business’s finances on your behalf, allowing you to spend more time doing what you do best.
Incorporate your business
Unless you choose otherwise, freelance and small businesses are sole proprietorships by default, even if you must register your business with your city or state.
As a sole proprietor, you’re considered the same legal entity as your business. Starting a sole proprietorship is an easy and low-cost method of starting a business. And because the business income of a sole proprietorship is considered personal income, taxes remain relatively simple.
However, freelancers and small businesses operating as sole proprietorships are held personally responsible for any business liabilities. For instance, if a client sues your business, you’re on the hook for any judgment, settlement, or legal fees levied against your business, potentially jeopardizing your home, car, and other personal assets.
Incorporating adds some complexity to your freelance or small business but separates the personal entity like you from the business entity. By incorporating your business, your personal assets are protected from any lawsuits filed against your business.
Buy business insurance for small business owners
Small business insurance protects freelancers and small businesses from risks that could lead to severe financial hardship. After all, no matter how careful you are and how intricate your plans may be, it’s impossible to secure your business against every danger that threatens it.
Could your business survive following a physical loss, such as a fire, theft, or equipment breakdown? How would you afford a lawsuit alleging copyright infringement or a breach of contract? Does your business have the cash to weather a data breach amounting to or millions of dollars in damages and legal fees?
Small business insurance shifts unwanted liability from your business to your policy, protecting your business from costly and unexpected financial burdens as the result of a an unexpected loss.
About CMR | PolicySmart®
PolicySmart’s risk management consultants provide independent group benefit, retirement and commercial insurance advice by reviewing your current portfolio of policies to improve coverage and reduce cost. By using our proprietary database – The CMR Database® (comprising some 13,000 brokers and specialists globally), we maximize access to the insurance and retirement industry providing greater options that will translate to better coverage and lower cost.
Please email croche@policysmart.app or call 888-873-1982 or 212-447-4300 for more information. www.policysmart.app
