Business Interruption Insurance: Why Your Company Really Needs It

Setting up a business in Australia is a dream come true for many. Unfortunately, some business owners are so preoccupied with living their dream that they forget to adopt a realistic point of view for their new ventures. TheAge.com.au writer Caroline James stresses that some of them even overestimate their business’ actual worth.

how-much-is-your-business-really-worth

Endeavour Capital founder and managing director Peter Wallace backs up Cleaves’ anecdotal view. The former NSW president of the Australian Institute of Business Brokers surveyed AIBB members on the pricing expectations of vendors and found only 21 per cent of them were within 10 per cent (over or under) of the true market value of their business.
“The largest group, 29 per cent, were vendors who overvalued their business by between 10 to 25 per cent, and while a modest overvaluation is not unsurprising, a worrying 43 per cent of vendors either overvalued their business by more than 25 per cent or had no idea on value,” Wallace says.

Assessing a company’s market value is not an easy task. Fortunately, business owners can look at it from a home inspector’s perspective, which means they have to take a look at their company from all angles, including the good and the bad. The bad refers to any risk that can compromise what they’ve started. It’s helpful to consider getting business interruption insurance to minimise the effects of those risks.

Commercial property insurance is not enough

Some business owners think that commercial property insurance is all they need. After all, this type of insurance can coverc risks such as natural disaster (flood, storm damage or earthquake), fire, theft, vandalism, and equipment or machinery breakdown.

Commercial property insurance can pay for repair or replacement of property in case of loss or damage. It doesn’t, however, protect business owners from incurring standard business expenses like rent, advertising, taxes and payroll expenses.

Several ways to lose generating profit

Obviously, a natural disaster can grind a business to a halt. Still, there are other factors that can decrease a company’s ability to lose profit, including loss of attraction or the inability to source or supply products. This occurs when a once-thriving business loses the ability to draw in customers either due to competitors or sudden limited access. In this regard, securing business continuity insurance for Buddina companies like yours will prove to be helpful.

Putting a price on one’s business entails taking a look at both the advantages and the risks. Working to get a clear picture of these risks can appropriately prepare business owners and show them the importance of business interruption insurance from providers like Insuring theProduct.

(Source: How much is your business really worth?, theage.com.au, November 14, 2014)

Keep Up To Date

Join our Newsletter for regular relevant insurance and risk management updates for your business

Explore Insuring theProduct