Corporate Law,  Finance,  Management

Small Business Owners: Ensure Your Long-Term Viability by Playing Safe

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Starting a small business inherently comes with some risk to owner investment. All it can take is a fatal accident involving a business partner, a natural disaster or crippling lawsuit to effectively end operations. Aside from the typical worries that come with daily operations, fledgling business owners would do well to take precautionary steps before launch.

Avoid Price Fixing

There’s nothing wrong with collaborating with other small business owners within your industry, but any for of actual or perceived price fixing should be avoided at all costs. Horizontal price fixing is defined as the collusion of two or more competitors to raise, lower or stabilize the price of any product or service without any legitimate reasoning to back it up. Something as innocuous as agreeing to sell Q-Tips at the same price could be construed as price fixing.

Dr. Paul Gift, of Pepperdine University, has quoted price fixing at a higher level, in an attempt to enhance profits, “minimizes competition and reduces output”, and is harmful to “both consumers and overall economic well-being”. With consumers being forced to pay an elevated price, it forces out those who would otherwise consume those products or services and by extension, the economy as a whole, as prices soar among competitors left out of the loop.

Bottom line, where it may seem harmless to discuss pricing with your competitors, it is a practice that should be avoided at all costs and could result in anti-trust violations under the Sherman Act. There’s nothing wrong with competitive pricing, but it should never be directly discussed with competitors, end of story.

Get Insurance

Regardless of the size of your small business, it’s a good idea to be protected against any unforeseen circumstances. For example, regardless if your business is home-ran or located elsewhere, a general liability policy will help in the event that your product or service harms or allegedly harms a third party. Forbes has compiled a list of insurance policies that small businesses should consider, and cover everything from potential lawsuits to a breach of company data.

An earlier concern is the sudden death of a business partner. Aside from setting up the terms for a possible dissolution, an important consideration for those who start a business together should be life insurance. In the event of tragedy, a life insurance policy payout can help cover the costs of any startup loans that the partner would originally help cover, thus keeping the business afloat.

The unfortunate reality is that unforeseen circumstances such as death and natural disasters happen all the time, and as such, small business owners need to carefully consider what’s available and what types of insurance they’d need to carry. This can’t be ignored.


Another way to help protect your small business would be to consider investments. Many small business owners are entrepreneurs by nature, but when you’re sinking over 60 hours a week into your venture, there’s hardly time to keep up-to-date on market trends. But if harnessed effectively, it can help you generate profits and even better, keep you in tune with your industry aside from perusing your competitor’s Facebook page.

The “quick and dirty” route is to speak with an investment professional who can help you setup a portfolio. This removes much of the task of analyzing what companies to invest in, and can be quite lucrative depending on how savvy your consultant is. Regardless of what they may tell you, it’s a good idea to invest in a portfolio that requires minimal maintenance.

Another consideration is hedging, which is an investment in a market that’s anticipated to rise, and will pay out at a later date. Or contrarily, protect the business from an anticipated price drop of their particular product or service. This could be an important consideration for small business owners outside of an insurance policy that may very well protect their business if approached effectively.

By playing it safe, you ensure that your small business will continue to operate, regardless of what may occur. Consider the ramifications of what could happen and anticipate for the worst possible scenario to ensure your long-term viability.

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Robert Conrad is a former Business student and manager with over 10 years of experience. His specialties during his tenure include morale and team building. In his rarely found spare time, he enjoys playing video games and visiting the Pacific Northwest, where he plans on living someday.

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