What services do you need to leverage while starting and building your business? In most cases you need a lawyer, you need a CPA, you most likely need a Web Designer, and after a long day you might need a beer…but when do you need insurance? Knowing when to explore insurance might seem obvious for Cannabusiness owners because of statutory requirements, but KEEP IN MIND, a statutory requirement does not necessarily equal optimal coverage for your business.
I can’t tell you how many businesses I work with that have insurance as the last item on a very long “To Do List” at best. Insurance is critical to protecting the business that you are working so hard to build, grow, and maintain. While it varies with each individual case, I thought I would put together a short list of stages where it makes sense to have insurance on your priority list.
STAGE 1: Building a Business Plan
It might seem a little premature, but thinking about insurance should begin as early as your pen hits the paper for your business plan. There is a cost to everything in business, and as you probably well know, insurance is no different. But what is the cost of insurance? This is where risk management comes into play. What are you incorporating in your business plan — will your business rely heavily on sub contractors? What type of building will you run your business out of? How will your building be secured? What will you do in the event of a robbery? What if someone claims they reacted negatively to your product? Obviously, these are not the driving questions of creating a business plan, but you more than likely will answer them in one way or another while building your plan. I challenge you to keep in mind how the answers to these questions will affect your application for insurance. If you don’t know, this stage of your business is the perfect time to reach out for help.
STAGE 2: Drafting Contracts
As you start your business and it continues to grow, you will no doubt be entering into a number of contracts. The clear first step in drafting contracts is to speak with your lawyer, but another productive call would be to your insurance partner. Insurance companies will look at your contracts for specific indemnification, hold harmless, and subrogation wording. The utilization of sub-contractors is considerably pertinent to the Cannabis industry. In many cases, there are multiple entities involved in the seed-to-sale process, so it is key to make sure that proper risk transfers are in place. The majority of the work will be on your lawyer in this process, but an insurance provider can help supplement the guidance they provide.
STAGE 3: Planning Renovations or New Construction for Your Building
While there is no surprise that insurance will be involved for building construction or renovation, I mean for this information to focus less on insuring the project itself and more on how the construction will affect your future insurance application. First, what type of building are you planning – warehouse, greenhouse, trendy provisioning center? The answer substantially changes both your application for insurance and the resulting pricing and coverage. If you are renovating an existing warehouse, for example, there is a chance it is a well fortified, potentially fire resistant, structure on it’s own. HVAC and Electrical will look completely different after completion of the renovations, but all in all, the insurance company will be looking at a secure structure. On the other hand, take the trendy provisioning center. It is totally understandable that you want to create a unique atmosphere for your patients, but how might that affect insuring your property? If you simply sacrifice security for aesthetics, you might see a higher premium, and you may have a more difficult time finding insurance. Note: I do not mean to imply that you can’t have both security and aesthetics because you absolutely can! In fact, I have seen it done well countless times. However, if you are just starting out, I caution you to keep this in mind as you build.
Entire discussions could be dedicated to the role of insurance in each of these stages, but hopefully, this provides better insight into when insurance should become part of your priority list.
There is a strong case for having insurance on the top of your priority list in the very early stages of your business. I am not saying that you need to think about and purchase every form of insurance in the market. If you have talked to me before, you know that I brand as insurance and risk management. Thinking of insurance ahead of time is really just the process of risk management:
- What steps are you going to take to mitigate risk?
- What risk do you plan on covering with insurance?
- Which risks could your business absorb on its own?
Insurance is not only about the purchase of a policy, it should be paired with risk management and the focus should be on protecting your unique business for the best possible success.