small business entrance with

Types of Liability Insurance Your Small Business Needs

As a savvy business owner, you are undoubtedly aware of the importance of operating with adequate insurance coverage. You need various business insurance policies to cover the costs accompanying liability claims and property damage. Without insurance, you will have to cover all costly damages and legal claims against your enterprise out-of-pocket.

There are different types of business insurance policies you can take out, but this article will focus on liability insurance. This type of insurance protects you from various risks that may pop up during normal business operations. Specifically, liability insurance protects your company's financial interest from penalties it may face because of litigation against it and covers the associated legal costs.

Here are the various types of liability insurance and which ones to consider for your small business.

Types of Liability Insurance

As mentioned above, there are various types of liability insurance structured to protect your small business from every possible claim or litigation angle. Some of the most common liability insurance policies include:

  • General liability insurance
  • Employment practices liability insurance
  • Professional liability insurance
  • Cyber liability insurance
  • Product liability insurance
  • Public liability insurance
  • Liquor liability insurance
  • Commercial auto insurance
  • Worker's compensation insurance

Which Types of Liability Insurance Do Small Businesses Need?

Some liability insurance policies benefit all businesses, while others offer protection against risks unique to specific companies. Therefore, small businesses need all the above-listed coverages, but your specific small business must handpick what applies to your company based on its circumstances and risks.

For example, liquor liability insurance is unnecessary if your business does not serve or sell alcohol. That said, here's a breakdown of the various kinds of liability insurance policies that could benefit your business.

General Liability Insurance

General liability insurance is a blend of public liability insurance and product liability insurance. Therefore, this insurance will protect you if a person or their property gets damaged while visiting your company or store by paying for their medical bills and lost wages. It also covers damage caused by a product your company makes or sells. In addition, general liability insurance will handle advertising injury, reputational harm, and copyright infringement claims.

Nearly all small businesses need this insurance, particularly if they rent or own an office or commercial space. Many client contracts also require general liability insurance, so you will miss out on a lot if you don't take out one. This type of insurance is a great way to get essential coverage in one policy.

It is no surprise that many experts recommend it as the sole business insurance to take out if your business can only afford only one type of liability coverage.

Public Liability Insurance

Public liability and general liability insurance are often thought of as the same thing, but this is not exactly true. This insurance is a type of general liability coverage, but you can take it out on its own as its narrower scope best suits your business.

Public liability insurance coverage applies strictly to accidents, property loss, and injuries suffered by members of the public (including customers, delivery personnel, and mere visitors) on your company's premises. Consequently, you need this policy if your business occupies premises frequented by many people.

Theaters, shopping centers, hotels and resorts, restaurants, white-collar firms, markets, and sporting venues are businesses that need public liability insurance.

Product Liability Insurance

A product liability insurance policy is worth taking if you are a manufacturing business or retailer. Products you make or sell can be defective and potentially harm consumers by causing bodily injury, property damage, illness, and even death. Consequently, this policy covers you against potential damages if your products cause unintended harm and are caught up in a legal battle.

You can purchase it as a standalone policy or enjoy it as part of your general liability coverage.

Professional Liability Insurance

Your business needs professional liability insurance, also known as errors and omissions insurance, if it profits off someone's expertise or professional services.

Consultancies, architectural and law firms, accounting agencies, engineering firms, and therapists are some of the biggest beneficiaries of this type of insurance. Unfortunately, even the most cautious and experienced professional service providers make mistakes.

Sadly, some clients may not be very understanding if your errors cost them significant revenue, time, or worse. Therefore, this policy is worth taking to protect you from these unsatisfied clients who might want to sue you if you miss a crucial deadline, provide futile business advice, or make an omission in your work. Your professional liability insurance will cover legal defense expenses up to your policy limits, helping you save cash in claims costs.

Employment Practices Liability Insurance (EPLI)

Your small business needs EPLI if it hires, manages, and fires employees. Specifically, this liability insurance covers wrongful acts that arise from your employment process. The most common claims covered under an EPLI policy include wrongful termination, sexual harassment, discrimination, wrongful demotion, privacy invasion, mismanagement of benefits, breach of employment contract, and retaliation.

It covers any attorney's fees, settlement costs, legal judgments, and administrative expenses your business may incur when an employee sues it.

Cyber Liability Insurance

Many small businesses assume they don't need cyber liability insurance, but you need this policy because the world has become increasingly digital. Your small business likely uses IT equipment and systems, which can be compromised from data breaches and malware attacks.

These breaches and attacks are quite costly and damaging. 60% of companies fold within six months of falling victim. Cyber liability insurance will help your businesses recover from financial damage caused by data breaches and cyber attacks. It can pay for credit monitoring, customer notification, legal fees, and fines.

Cyber liability insurance should be non-negotiable if your company handles credit card numbers and sensitive data, works in the cloud, or operates in areas like healthcare, retail, and financial services.

Calhoun Agency for Your Small Business Liability Insurance Needs

We are an independent insurance agency and broker with access to a carefully handpicked group of reputable insurance providers. Therefore, we find the best insurance policy based on your needs. We also have over 90 years of experience in serving the insurance needs of our cherished clients in New Jersey and Pennsylvania.

Contact us today at 856.428.8090 to learn more and get started.


four people working on computers with headsets in office

Facing The Threat Of Cyberattacks

The impact of a conflict can spread much further than the countries at its center. The Russian invasion of Ukraine has already seen consequences for the global economy, cultural events, and more.

The U.S. has imposed several sanctions on Russia as a consequence of the invasion, leading security professionals to warn of increased cybersecurity threats at this time. These types of attacks are designed to cause severe disruption, potentially affecting individuals as well as businesses and organizations.

While the risk to small businesses is low, it’s a good idea to make sure you’re fully protected against cyber attacks and know what threats to look out for.

Take a look at the following steps to take to protect your business from cyber attacks.

Follow Cybersecurity Best Practices

It’s easy to take online security for granted, but there are a lot of basic measures you can take to help protect your business, as well as your personal accounts and information. Give your business additional security by adopting measures such as:

Multifactor Authentication

Multifactor authentication will make it harder for intruders to get into your accounts. You’ll need to confirm your ID when logging in through text message or another method to give your account some added protection.

Use Unique, Complex Passwords

Using the same passwords for all of your accounts and systems puts everything at risk if your password was leaked somehow. Using unique, complex passwords for all of your accounts provides you with a lot of protection. Creating strong passwords should be advised to everyone within your business, including customers if they have an online account with you.

Protect Files

Encrypting your files may be necessary if you deal with personal data. Creating a data management plan should help you decide how you’ll store different types of data, so that you can put the right protection in place for your files if needed.

Ensure Portable Devices are Fully Secured

If your business issues portable devices such as laptops, phones, tablets, etc., you should ensure that the devices are fully secured.

Provide Awareness Sessions to Employees

Raising employee awareness is an effective strategy for preventing cyber attacks. Attacks can happen as a result of human error, such as clicking links in a phishing email or using a weak password. By educating your team about the risks and how to prevent them, you can boost your company’s defenses.

Run Software Updates

Updates may be a source of frustration, but they are necessary to ensure your systems benefit from the most up-to-date protection. From your antivirus products to your applications, make sure your everything is running the latest versions. As new threats emerge, companies are quick to release new updates that put protection in place and keep systems secure.

Make Flexible Working a Secure Way to Work

Many businesses have adopted flexible working because of world events. Employees may work from home, in the office, or a combination of both. However, your network and data could be compromised because of your employees' home networks.

Reviewing IT security for both office and home can ensure that flexible working remains a secure option for your business.

Ensure Your Backup System Is Robust

A system outage can have some serious consequences for your business. Having plans in place to back up your system and data in an emergency can give you confidence that your business can continue to operate after an incident.

While cloud computing provides a simple way of backing up your files, you should also consider using secure external drives to back up your most important documents.

Consult with IT Security Experts

As a small business, you may find the prospect of cybersecurity overwhelming. Outsourcing your IT management can help ensure you have up-to-date protection in place that meets your business needs. It can also mean expert help 24-hours a day, helping your company resume services quickly in the event of an outage.

Working with an IT company can help protect you from the latest threats and deal with monitoring and updates on your behalf.

Insure Your Business

Business insurance is a must to protect your business from many threats. Business insurance not only protects your premises, equipment, etc., but it can also protect you from liability claims that could be made against your business. Being without it leaves you at risk of some significant costs if something were to happen.

It will be vital in the event of a cyber attack where your business is interrupted or you have to deal with a data breach. Cyber liability is important for small businesses, giving you extra security. Now is a good time to check your policy and make sure it provides your business with everything it needs.

Calhoun Agency is an independent insurance agency specializing in different insurance, including cyber liability. If you want to find out more about any of our business insurance services, request a quote today and our team will be in touch.


a man with broken arm in a sling

Benefits Of Pay-As-You-Go Workers' Compensation

What Is Workers' Compensation?

Workers’ compensation is a type of insurance that covers lost wages and medical expenses if an employee becomes sick or injured. Under some circumstances, the coverage will also include death benefits and rehabilitation support.

What Is Pay-As-You-Go Workers’ Compensation?

Pay-as-you-go workers' compensation insurance calculates premiums using payroll in real-time. The result being that employers can access more accurate payments.

Traditional workers’ compensation payments have businesses pay a lump sum upfront, and many end up overpaying throughout the year. As Zenefits puts it, ‘Pay-as-you-go workers’ comp alleviates the inaccuracies and cash flow burdens that often accompany traditional workers’ comp payments.’

How Does Pay-As-You-Go Workers’ Compensation Work?

Pay-as-you-go workers' compensation is based on your payroll runs. For example, if you pay your employees monthly, you’d figure out the premiums per monthly payroll. Using this system, employers can calculate exactly how much money is due for that period.

A traditional workers' compensation policy works a little differently. Usually, employers are required to pay a lump sum to their insurance provider. This payment typically represents about 25% of the employee's estimated earnings for that policy year. The employer is required to pay the remaining premiums either quarterly or monthly.

Pay-as-you-go workers' compensation works differently from traditional workers' comp insurance, but your responsibilities are exactly the same. As The Hartford explains, ‘It’s not different insurance, and it doesn’t replace workers comp insurance or your responsibility to pay premiums.’ Both traditional workers comp and pay-as-you-go insurance are purchased through licensed insurance providers.

Do All Businesses Need Workers' Compensation Insurance?

Yes! If your business has 1 employee or more, you need workers' compensation insurance.

What Does Workers' Compensation Insurance Cover?

Workers’ compensation insurance covers four different benefits:

Medical Benefits

If employees are injured on the job, or they experience a work-related illness, workers' compensation covers associated expenses. These medical costs might include medications, physical therapy, doctor visits, or management techniques for chronic pain.

Disability Benefits

If an injured member of staff can no longer work, disability benefits can cover their wages or part of their wages. The wage replacement will be calculated based on the disability, state regulations, and employee earnings. Depending on the extent of the disability, the benefits may be temporary or permanent.

Rehabilitation Benefits

These benefits are designed for injured workers with permanent disabilities. When permanent disabilities prevent an employee from returning to their job, rehabilitation benefits support employees in gaining new skills. These benefits might cover vocational training, job placements, learning materials, skills assessments, and tuition.

Death Benefits

If a staff member dies because of a work-related incident, workers’ compensation insurance pays benefits to any dependents, such as the employee’s children or spouse, for example. These benefits can also cover funeral expenses or loss of income.

What Are The Benefits Of Pay-As-You-Go Workers' Compensation?

There are many benefits of pay-as-you-go workers' compensation.

No Upfront Payments

Unlike traditional workers’ comp policies, you don’t have to make an upfront payment. With the pay as you go option, you can keep more money, and improve your cash flow. When you’re required to make large yearly payments, this can negatively affect your budget.

No More Guesswork

Using a pay-as-you-go policy, you won’t have to provide an estimate and risk inaccuracies. The premium is based on your payroll data in real-time, whether bi-weekly or monthly.

Adjust To Changing Needs

When you opt for a pay-as-you-go plan, you can make adjustments along the way. Pay-as-you-go ends up being a more flexible plan. For example, when employees leave or join the company, you’ll be able to adjust your plans accordingly.

Simple Audit Procedure

Any money you’re required to pay is based on your payroll. This way, you can ensure that your premiums are accurate. When your premiums are accurate, you’re less likely to provide incorrect estimates. As a result, your audit procedures will be more simple.

Avoid Missing Deadlines

With a pay-as-you-go plan in place, it’s easier to stick to deadlines. Employers can easily set up automated payments to stay on track. When you integrate your premiums and your payroll system, you can simplify the payment processes.

What Must The Employer Do When An Employee Becomes Injured?

When an employee reports an injury, the company needs to notify their insurance carrier and file a report with the State. The insurance carrier will assess the claim, while communicating with medical providers, the injured worker, and the employer. Once a claim has been accepted, they will direct the worker to a medical provider for treatment and support.

What Types Of Injuries Are Not Covered Under Workers’ Comp?

Certain types of illness and injury will not be covered under a workers’ compensation policy. These include:

  • Self-inflicted injuries.
  • If the injury occurred while the employee was committing a crime.
  • If the individual violated company policy, and was injured as a result.
  • If the staff member was not working when the injury occurred.

What Is The Dispute Procedure?

If there is a dispute, the employee can file a Claim Petition. Alternatively, they can apply for an informal hearing with the Division Of Workers’ Compensation.

Find Out More

To find out more about workers' compensation insurance, contact the Calhoun Agency. With the Calhoun Agency, businesses can access many types of insurance, including workers’ comp, property insurance, liability insurance, and commercial umbrella. To protect your business interests and assets, it’s important to have the right insurance policies in place.

The Calhoun Agency can answer any further questions you have about workers’ compensation insurance.


woman next to whiteboard in office that says

Types of Business Insurance in NJ

No matter what type of business you run, you need business insurance to protect your investment. There are many types of business insurance in New Jersey, but the coverage you choose will depend on your operations and needs. To help you make the right decision, let’s learn about the different types of business insurance in NJ.

Business Liability Insurance

All businesses need liability insurance, but it’s not as simple as finding one policy. There are many types of business liability insurance:

General Liability Insurance

This type of insurance protects companies against claims for personal injury, bodily injury, or property damage.

Umbrella Liability Insurance

A type of advanced liability business insurance, umbrella liability insurance is used to protect businesses from major claims and lawsuits. Unless a company has umbrella insurance, they could end up paying for excess damages, medical bills, and legal fees.

Professional Liability Insurance

PL insurance covers companies in the event of negligence claims. These claims might accuse the business of harmful mistakes or performance failures.

Employment Practices Liability Insurance

EPL insurance covers employers if their staff file discrimination based claims. Alleged claims could be based on wrongful termination or discrimination based on age, race, disability, or gender.

Cyber Liability

Cyber liability covers a business in the event of a cyber security breach. For example, if a business experiences a hacking scandal resulting in customer data being exposed, a Cyber Liability policy covers the business for financial losses and supports the company to rebuild its reputation.

As you can see, even one type of business insurance can have several subcategories. If you’re confused about which types of business insurance you need, it’s best to talk to your local New Jersey insurance provider.

Property Insurance

Property insurance is a policy that protects both your business premises and equipment. Whether you rent or own your property, you’ll need some kind of property insurance to protect your assets and interests. If your property or your equipment is damaged, destroyed, or stolen, you’ll be covered under property insurance. A typical property insurance policy will cover the following areas:

  • Any inventory that’s stored in your warehouse or office.
  • Equipment and tools that you use for your company.
  • Your business furniture, including tables, chairs, and couches.
  • Any personal property that’s stored at your business premises.
  • Business computers and other tech equipment.
  • Important documents.

What Does Property Insurance Usually Cover?

Under a property insurance policy, you’ll be covered if your business property becomes damaged in a fire. You’ll also be covered if a customer experiences an injury while on your business premises. If your equipment is stolen, and you experience downtime as a result, you’ll be covered for that too.

Business Interruption Insurance

According to Investopedia, ‘Business interruption insurance is insurance coverage that replaces income lost if business is halted due to direct physical loss or damage.’

If you can’t run your business because of an incident or accident, business interruption insurance can cover your financial losses. You can use this type of insurance to cover expenses such as payroll, utility, bills, and more.

Workers’ Compensation Insurance

Workers’ compensation insurance covers medical costs and lost wages if a member of staff is injured or sick. Employees are covered under the following categories:

Disability Benefits

If an employee is injured, and cannot continue to work, workers’ compensation entitles them to disability benefits. These benefits are used to cover wages lost, and may be temporary or permanent.

Medical Benefits

If an employee gets injured, or suffers a work-related illness, that employee is covered by workers’ compensation. These policies can cover medical expenses, including doctor visits, physical therapy, medication, or pain management.

Death Benefits

If an employee dies in a work-related accident, workers' compensation pays benefits to their dependents.

Rehabilitation Benefits

When a worker suffers permanent disabilities, they are entitled to rehabilitation benefits. If the person can no longer perform their old job, these benefits cover retraining, tuition, learning materials, and skill assessments.

Auto Insurance

If you or your employees use a car for work, your vehicles must be insured too. You’ll need this coverage to protect yourself in the event of a car accident. Auto insurance policies can protect your business from physical damage, towing costs, and liability.

Bonding

Bond insurance refers to a policy that’s purchased by a bond issuer. It’s used to guarantee the repayment of both primary and related interest payments. Bond issuers purchase this insurance type if they are looking to boost their credit rating, and decrease the interest amount. You might have also heard this insurance referred to as financial guarantee insurance.

Commercial Umbrella Insurance

Commercial Umbrella Insurance offers companies extra coverage to protect their finances and assets. Under some circumstances, an expensive lawsuit will exceed the limits of a company's main insurance policy. Commercial Umbrella Insurance is a way to access extra protection.

If businesses exceed their primary coverage, and they do not have an umbrella policy, they could be obligated to pay extra damage expenses and legal fees out of pocket.

A commercial umbrella insurance policy can also cover advertising or personal injury, such as reputational damage. Personal injury covers many areas, including privacy invasion, slander, libel, wrongful eviction, or false arrest.

Inland Marine Insurance

Inland Marine Insurance is used to cover equipment, materials, and products that are transported across land. It can also include equipment that’s stored with a third party.

Inland Marine Insurance covers property that is transportable or movable. These policies cover:

  • Networking tools and communication equipment.
  • Medical & scientific equipment.
  • Cargo vans, food trucks, and other transportation equipment.
  • Construction supplies and tools in transit.
  • Sculptures, photography, and paintings.

If you’d like to discuss your business insurance needs in New Jersey, contact the Calhoun Agency today.


businessman working on computer in office

Why Do Small Businesses in NJ Need Cyber Liability?

New Jersey is one of the smaller US states, however, it’s densely populated. Many industries contribute to the thriving economy, including technology, clean energy, media and film, and financial services. No matter which type of business you run in New Jersey, you’ll need cyber security support to protect your investment and brand.

According to Tech Injury, '30,000 websites are hacked daily, and 64% of companies have experienced at least one form of cyber attack.' Some of the biggest threats to companies are phishing attacks, malware, ransomware, social engineering, and DDoS attacks. To stay safe, online businesses need adequate protection, including cyber liability insurance.

What Is Cyber Liability?

Cyber liability is a type of insurance to protect companies from cyber security threats. In the event of a cyber security breach, cyber liability insurance acts as damage control. If a business suffers financial losses because of a data breach, these losses will be covered by a cyber liability policy. A typical policy is likely to cover the following costs:

  • Restoring Data: Covers the expenses associated with replacing damaged software and restoring programs & data.
  • Downtime Losses: When operations come to a halt, your business ends up losing money. A cyber liability policy will cover any financial losses because of downtime.
  • Cyber Extortion: These insurance policies can also cover ransom payments, as sometimes hackers will steal info and threaten to destroy it unless a ransom is paid.

In the aftermath of a cyber attack, businesses may need to hire an IT expert, attorney, or a PR professional (depending on the damages caused). Some cyber liability policies also cover these expenses.

How Is Cyber Liability Insurance Different From Data Breach Coverage?

According to Forbes, ‘Data breach insurance will assist your business if sensitive financial data gets exposed in a data breach.’ There’s also the option to add extra coverage, such as business income insurance, for example. This would be appropriate if you temporarily could not operate because of a data breach.

Cyber liability insurance is a more comprehensive form of coverage designed for businesses who want robust cyber protection. Cyber liability covers financial losses and also offers legal protection. Data breach coverage acts to protect your finances, however, it does not include legal protection.

Why Do Small Businesses Need Cyber Liability?

There are many reasons businesses need cyber liability coverage.

Financial Losses

According to Solvere One, small businesses pay an average of $38,000 for a cyber attack, while larger companies can pay up to $570,000. Businesses may struggle to pay for the damages and associated expenses without a cyber liability policy. You’ve worked hard to make your business a success, but unless you protect your investment, you’re putting your company at risk.

Reputational Losses

Research from Data Privacy Manner discovered that, ‘71% of CMOs believe that the biggest cost of a security incident is loss of brand value.’ Experiencing a data breach can damage your reputation, as both potential and existing customers may lose trust in your brand.

When you suffer reputational losses, it’s advisable to work with PR companies and reputational management services. Certain cyber security policies will cover these costs, and help you to get back on your feet.

Reduce Downtime

Data from Varonis discovered that, ‘The average time to identify a breach in 2020 was 228 days,’ and ‘the average time to contain a breach was 80 days.’ When business operations come to a standstill, these companies lose out on both time and productivity.

Putting cyber liability policies in place is the best way to reduce downtime and get back up and running fast.

Legal Compliance

When a business experiences a data breach, they are legally obligated to notify anyone affected. Adhering to these regulations can be expensive, especially in relation to identify theft, legal action, and security fixes. A cyber liability policy can cover data exposure and support businesses to comply with the law.

Recover Lost Data

In the aftermath of a data breach, businesses may need to recover lost or stolen data. Cyber liability policies can help businesses retrieve their data and minimize the impact of the breach.

Forensic Support

After a cyber attack, your company will need to perform an investigation to find out what caused the breach, and the extent of the damages. Certain cyber insurance policies can cover forensic costs, helping businesses access expert advice.

Why Do Cybercriminals Target Small Businesses?

Identity thieves often prey upon small businesses because they typically have less security in place than their larger counterparts. With the help of cyber liability insurance, small businesses can protect their interests and access the support they need.

What Can Businesses Do To Prevent a Cyber Security Attack?

There are many things that businesses can do to prevent a cyber security attack:

Security Best Practices

To prevent a security breach, businesses must adhere to cyber security best practices. Companies should use multi-factor authentication systems to check the identity of anyone accessing their network.

MFA systems include layers, such as robust passwords, SMS message codes, and testing biometric traits. With robust security practices, businesses can keep unauthorized people from accessing their data.

Companies can take advantage of Mobile Device Management systems to oversee their remote network and trigger security updates. Password management tools can also help businesses keep their various accounts secure.

Security Software

Businesses should be using security software to keep their data safe and sound. This includes antivirus and anti-malware software, as well as cloud based security software.

If you’re not sure how to improve your online security, consider hiring an IT firm to perform a security audit.

Train Your Team

Ensure that you provide your team with effective cyber security training. Teach them how to spot phishing scams and how to protect their accounts. Cyber attacks are becoming more advanced all the time, and so it’s vital that your team have the knowledge that they need.

With the right cyber security protection, you’ll help keep your company safe from a cyber attack. If you experience a cyber attack, a cyber liability policy will help you cover the costs and provide you with access to expert help to maintain your reputation.

To learn more about cyber liability insurance, contact the Calhoun Agency.


Audit Data Analytics: Why Auditors Should Care

Perhaps you are a new entrepreneur about to launch a business or innovation you have been dreaming about for years. Or maybe you have an established business and things are going well, or maybe even too well. In both instances, you are going to need capital – the “oxygen” that every business needs to grow and prosper

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HOW DO YOU DECIDE?

So now you are writing your first business plan or touching up the old one in anticipation of raising capital. Capital can only come into a business in one of two ways. Capital that is generated internally through positive cash flow from business operations (e.g., selling stuff), or from external funding sources. The new entrepreneur is limited to only one option – external funding sources. The established business is hopefully generating positive cash flow but may require additional capital. Which funding option is best? Is it best that the capital come from only one source, or does it make more sense for the capital to come from multiple sources? How do you decide?

 

 

How you decide to capitalize the business is called your capital formation strategy. There are undoubtedly a number of other factors to consider depending on your company’s current circumstances, and, quite importantly, where you want your company to go in the next few years. If you are still hesitating what development strategy to pick for your company.

 


Top 3 Concerns When Choosing A Cloud Vendor

Perhaps you are a new entrepreneur about to launch a business or innovation you have been dreaming about for years. Or maybe you have an established business and things are going well, or maybe even too well. In both instances, you are going to need capital – the “oxygen” that every business needs to grow and prosper.

HOW DO YOU DECIDE?

So now you are writing your first business plan or touching up the old one in anticipation of raising capital. Capital can only come into a business in one of two ways. Capital that is generated internally through positive cash flow from business operations (e.g., selling stuff), or from external funding sources. The new entrepreneur is limited to only one option – external funding sources. The established business is hopefully generating positive cash flow but may require additional capital. Which funding option is best? Is it best that the capital comes from only one source, or does it make more sense for the capital to come from multiple sources? How do you decide?

How you decide to capitalize the business is called your capital formation strategy. There are undoubtedly a number of other factors to consider depending on your company’s current circumstances, and, quite importantly, where you want your company to go in the next few years. If you are still hesitating what development strategy to pick for your company.