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Things To Expect When Investing In A Startup

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startup investment
Making the first move is tough, but it gives you the confidence to lead a crowd behind you and take them along the right path.
Investing in startups is an exciting and challenging process. The investor must choose his area of interest before financing, since it’s vital to understand the business mode,l and you can also help the startup with your strategic inputs. Depending on your investment profile, you can choose the following options to fund a startup business.
  • You can create a profile on global platforms like AngelList and CrunchBase to look out for interesting startups.
  • There are also different deal making platforms like LetsVenture and Venturefund.com that will help you to get connected with the startup community.
  • Crowdfunding is another choice if you want to invest smaller amounts along with another group of investors with common interests and risk appetite.
  • You can also try to establish contact with accelerators to find better startups to invest in.
The startup ecosystem is highly volatile, so before you decide to invest in a startup business, you need to consider many things like the liability, accurate valuation of the firm, your timeline, and your exit strategy. Most of the small-business investment opportunities come from friends, family, or word of mouth. So, before you get into financing a new venture, measure your steps carefully. It’s vital to understand the business model and the revenue generation model.

Understand the structure of the business

There is always a chance that a startup business may fail. So, you need to understand the structure of the business and the risks involved in detail. Many startup businesses shut down within the first five years of operation mainly due to a flawed business model. Hence, if you do not understand the structure of the business, the chances of failure is high. It is important for the investor to limit their liability in the business. So, before investment, drafting the scope of the partnership and the associated liabilities is crucial for an investor.

You may not see profits in years

If you want to invest in startups, make sure that you are not in a hurry. Putting a large sum in a business can be a risky affair, and there are chances that you may not see any returns in years. Set milestones accordingly and understand the potential of the business to break even.

Plan an exit strategy

Investment in a new business venture means taking a risk. There are chances that the venture may fail and your investment is lost. It is good to wait for five years before you can expect some return on your investment. However, this varies depending on the nature of the business and if you need some liquidity before that period, you should plan a proper exit strategy. These clauses should be clarified upfront before investing and should be agreed upon by both parties with a legal stamp.

Homework

There is rarely any match between your expectation from the business and the real scenario. So, before you invest a lump sum amount in a startup, you need to do a SWOT (strengths, weaknesses, opportunities, and threats) analysis of the project. The startup should also have a proper business and marketing plan. Stay involved and review the performance of the startup periodically. You may consult a business valuation expert to take the correct decision.Happy investing!

Business

10 Things To Think About When Purchasing Business Insurance

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purchasing business insurance
When you’re purchasing business insurance, there are many options available. In fact, there is a lot of information to digest. The thought of wading through all of them is daunting. However, business insurance is a must because going into business is a risky venture. Even the most tenacious entrepreneur is not guaranteed success.
It is not enough to simply buy business insurance. You need the right kind of insurance based on your industry. Here are some things to consider before buying a business insurance.

1. The Best Fit

Just like personal insurance, there are many types of insurance that cover different aspects of your business. For example:
  • General liability covers lawsuits and legal fees.
  • Product liability covers problems of the products you sell.
  • Professional liability is for service-based businesses.
  • Property insurance protects the building where your business is located.
Do your research to find out what types are needed before purchasing business insurance.

2. State Requirements

Depending on where you are, some states require minimum coverage of different types of insurance. Make sure you have all the basics required by law.

3. Cost Varies

Cost can vary depending on the insurance provider. The best way to find the best value is to shop around by requesting quotes from different providers.

4. General Liability

If you think you're not going to get sued over small things, think again. You can get into an accident while driving to work or a customer could get injured while in your store. Be smart and consider getting general liability when purchasing business insurance.

5. Homeowner's Insurance Does Not Cover Home-based Businesses

If you run your business from home, your personal insurance can’t be used to cover business-related claims.

6. Insure Business Against Disasters

Natural disasters and accidents leave your business vulnerable. Get additional coverage by purchasing overhead insurance which will pay for rent, utilities, payroll and other necessities in the event that you get injured, sick or die.

7. Umbrella Policy

There are so many different types of insurance to consider. To make it a bit easier, consider an umbrella policy which is a "catastrophic care" type of insurance for your business.

8. Business Interruption Insurance

You can’t tell when a natural disaster will happen. Think about getting business interruption insurance in the event that your business has to stop operation due to natural or manmade disasters. It can also be used to reimburse lost profits.

9. Consider Higher Deductibles

Reduce your business insurance cost by considering paying for a higher deductible. Higher deductible means lower premiums. But be wise, you don’t want too little cash when you need it most.

10. Gauge Your Risk

Know your insurance needs and risks. Your vulnerabilities could leave you on the losing end of a lawsuit even if you have a well-run business. Also consider the risks to your employees and customers when they are in your business premise like slips and cuts which could lead to lawsuits. You will need insurance coverage that covers your all your weaknesses.Don’t just buy business insurance and ignore it as your business grows. As your operations expand and assets grow, you need to reassess your risks and weaknesses periodically. A good and competent insurance agent can advise you on the kind of insurance you need for maximum coverage with the least financial investment. The right insurance at the right time can help your business weather financial storms.
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5 Best Health Insurance Options For Startups

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best health insurance
Many startups and small businesses feel intimidated by the responsibility of providing the best health insurance for themselves and their employees. The fees are daunting and startups with limited capital are sometimes opting to forgo insurance coverage. But entrepreneurs are more at risk than ordinary employees. After all, many businessmen are fully invested in their company. However, a trip to the ER, an illness or a costly medical procedure can spell the end of the business. Here are options for health care insurance for startups and small businesses.
 

Individual Health Insurance

Individual health insurance can be with or without a defined contribution allowance. This plan allows employees to purchase their own individual health insurance coverage through the public marketplace or through a broker. Employees can select any carrier or any insurance policy and then access discounts on premiums by using individual health insurance tax credits.Startups can contribute to their employee's' premium and other health expenses using the health reimbursement arrangement (HRA). They can contribute any amount up to federally defined limits.Individual health insurance is an easy and cost-effective for small groups and startups to access insurance coverage that is priced out of the group health insurance. 

Private Small Group Plan

Purchasing a private small group plan is another option for startups. Small groups can find lots of options on the private market place. There are also states that offer plans for small groups so you can find the best health insurance for you. 

Co-Op

Joining a co-op is also a good option for startups. It gives you a boost in buying power and spreads the risks to a larger group. However, not all co-ops are structured the same way. It is important to find a co-op with good rates than the startup can get on the open market or SHOP. This depends on the market itself or regional underwriting insurance laws that dictate rates or the co-op itself. 

SHOP Marketplace

The Small Business Health Options Program (SHOP) Marketplace is a public state or federally run exchanges that sell insurance to small groups or startups. This is a good place to find the best health insurance for small groups with less than 50 employees if they can meet certain requirements. Different states have different laws. In Massachusetts for example, startups need to contribute at least 50% of the premium amount; businesses with 1-5 employees should enroll 100%, while those with 6-49, 75%.If your business is eligible, SHOP gives access to small tax credits. Brokers affiliated with SHOP can help startups purchase the plan. 

Private Health Exchange

Brokers offer startups private exchange option by working with a defined contribution. Small groups give employees a set contribution that goes towards a menu of plan options. The plan can be individual or group based. This can be beneficial since employees can choose a health plan supplied by participants. Startups and small businesses don’t need to forgo insurance. A licensed health insurance broker can be a good resource if you are looking for ways to minimize your risk and ensure the coverage of your employees. As for a broker that specializes in small group policies, individual or family policies to help you assess the different ways you can get health insurance for your business.
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Business

Insurance Coverage For Your Business

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insurance coverage
If you are running a business, you must insure it. You should understand what kind of insurance coverage you need for your enterprise. If you have a consulting business, having a proper error and omissions (E&O) insurance is important. You should purchase a general liability insurance if you want to take the lease of a building. Small businesses have a lot of things to protect.

Property Insurance coverage

You have tangible things to protect, such as machinery, merchandise, etc. There can be natural calamities like flood or earthquake. There can be major fire accidents. A fire can destroy all the machinery, and you need a replacement. The insurance should specify in clear terms that how much coverage they will provide in case of any accidents. In general cases, the property insurance covers business building along with inventories, furnishings, etc. It can also provide coverage to equipment breakdowns and the cost of removing debris.

General Liability coverage

You must purchase a general liability insurance for your enterprise. This insurance covers your products, completed operations of the company and premises operations. If you rent a building and one of your employees falls, you will be covered. If you are into a restaurant business and someone gets food poisoning, you will be covered.

E&O insurance

This insurance is also called the professional liability insurance. It is important for the people who are in the consulting business. If your consultation does not meet your client’s requirement and your client sue you, you will be covered by the legal fees and defense costs.

Worker’s compensation insurance

If you have employees in your business, you need to purchase worker’s compensation insurance. The cost of this insurance depends on your residing state. You should remember that worker’s compensation insurance is subject to audit.

Auto insurance

If you own a vehicle for your company, you need to buy auto insurance. You should add a hired and non-owned automobile liability rider. Auto insurance is important if you face any accident when you or your employee use your vehicle during working hours.

Cyber Theft of your business bank accounts

Every year huge amounts of funds are stolen from different accounts through cyber hacking. You need some protection to save your business from this financial crisis. There is a new kind of insurance in the market to cover you from cyber theft and fraudulent wire transfers. Consult your insurance advisor to know more about the insurance policy.

Small business data compromise insurance

If you are running a small business, you need to protect your vital data from getting leaked. This insurance helps protect your company’s reputation of your customer’s personal data is stolen or your employee’s information is compromised from your business side.If you have a home-based business, the homeowners’ insurance policy usually provides very limited coverage for tools and equipment damages and business related property. Consult your insurance agent to understand each point of insurance coverage. Decide which insurance is more appropriate for your company. You can also consider buying more coverage to protect valuable data.
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