Sunday, November 23, 2008

Business Insurance

Sunday, November 23, 2008

A cold morning here on the mountain, so cold in fact that I think it's January, not November. The seven degrees above zero is not the bad part, it's the wind which cuts through untempered skin that just a week ago experienced +60 degrees for two days. It will come to pass but for the next few days through Thanksgiving, we will experience more light snow, wind and cold. I already am missing the long morning walks with Karl the Wonder Dog but even he says the wood stove is too comfortable to trade for anything.

Back when I started this blog I said I would try to offer some insight into building and growing a business. Some of what I offer needs personal interpretation, like how I build a new shade garden, but some guidance like putting up shade houses or where to buy them in New England is more clear. Like it or not, one aspect of business that always needs attention is insurance.

There are a few things in life that I don't care for all that much. Some are controversial and not good on a blog and insurance is close to the perimeter of such a discussion. It's one of those things that you just plain have to maintain in today's world. It comes up any time you apply for bank loans and you get reminded each year at tax time if you have a good accountant. But before the insurance discussion, a reminder about what you call your business in the world of taxes and insurance.

Years back we ran Vermont Flower Farm as a hobby at home and then it actually became a real business. Originally we were a sole proprietorship but as time passed, our assets and our customer base grew to the point that we kept looking at the value of our personal assets and our business assets. We had never had any problem with customers or staff but you always heard that "fall down and break a leg" discussion. Our business had grown to a longer season and our gardens placed customers in different places on our property.

Some visitors had to walk down the dirt road to access the lower hosta garden, some walked through a bumpy woods path to the peonies and daylily nurseries out back and others just plain pulled little red coaster wagons through the paths and picked up black plastic pots of various perennials. Probably the scariest day in our history to that point was the day a psychiatrist sent his patient to our place (unannounced by all of course!) to view nice flowers (a positive I was told) and come in close proximity with insects (a negative I was told) which she was paranoid about. The blood curdling screams of that exercise in absolute stupidity will never leave my recall, not even this morning at seven degrees, white and blustery. The woman was not hurt physically but her paranoia was challenged big time and as she ran through the gardens, arms flailing, I had no idea how/if she had been injured.

Sometimes it takes little things like this to make you bump yourself to the next level and we immediately moved to a commercial business policy and also moved from a sole proprietorship to a limited liability company. The latter separates personal and business assets and in today's world that's where we should have been in the first place. An LLC doesn't insure that if you are sued you'll be safe, it offers a little more assurance that your bed will still be there at night and the fridge will still run, even if empty of food.

As businesses grow, staff additions sometimes occur and as we moved away from bartering with people and part time laborers, it was clear that workers compensation insurance had to be added to our list of insurances. In Vermont when you first start with workers comp, your business may have some history but not on record with an insurance company so you begin with the assigned risk group. Your agent searches for companies interested in insuring your business and you make a decision on the "takers". Depending on the business, there may be few interested companies and the premiums may shake you up. A roofer, carpenter, electrician, heavy equipment operator all pay startling premiums and those are reflected in the wages they receive.

Part of Vermont's regulation is that as soon as you enter the assigned risk pool which is state mandated, your name is made available to other registered agents. This insures that employees who might have been placed in an incorrect risk group can be properly assessed. So as the close of your first year in the assigned risk pool nears, you begin to hear from companies who are interested in bidding on your coverage.

I have always been driven to keep paperwork at a minimum and have had the same insurance company since 1983. House, business, two cars, at one time a lake property--all under one umbrella. Workers comp was the first insurance to disrupt this convenience and I learned a lot about the change. When I rebid the entire package, one company said they would save me almost $200 per year but there was a caveat. They proposed coverage through 4 different companies which they said they would maintain annually. I just couldn't buy it because in my mind I was and am comforted in the knowledge that I know who I am calling if a have a question and my rates of combined insurances are about as good at they will get.

So the only message I can offer on a cold morning and after two cups of coffee is to research your insurance needs well, make a list of questions and get the answers from of variety of interested companies. Consider deductibles and replacement values and loss of use of buildings or machinery, think through vandalism and theft, natural disaster and your customer experience to date. If you are an organic operation, consider outside influences that might rob you of that classification. I once knew a family who had an organic operation and a plane flew close by spraying an adjacent orchard. The over spray hit their farm and you can imagine the rest.

None of this is difficult, all is a bit of a chore but it all has to happen. Since businesses are for the future, they factually do have a life, and since good business people should have a plan for what they will do with their business when they don't want it any longer, insurance is a big part of this. If you have insurance questions, I cannot be helpful other than to say do not postpone the responsibility, some of which you are legally obligated to maintain.

Writing from the mountain above Peacham Pond where the sun is shaking off a cold start and the blue jays are using their beaks to knock the snow off the feeder to find breakfast.

George Africa
The Vermont Gardener
Vermont Flower Farm

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