Acorn to Oak - Your Business Grows Up

March-April 2007

MANY SUCCESSFUL COMMERCIAL ARBORIST SERVICES were started by a young entrepreneur who had some experience in the trade, a bit of business sense and a lot of hope and energy. Early on, while in their 20s or 30s, they focus on creating cash flow by establishing a good client base. Cash flow is the means to make payments on leased equipment and vehicles as well as for their own survival needs such as food, rent, etc.

Over the years, the business grows and cash flow is used to acquire land, erect buildings for office, storage and maintenance of an expanding inventory of equipment and vehicles, and to hire personnel such as an office manager, in-house accountant, on-staff mechanics and many skilled workers. The business becomes well established with annual contracts and significant acquired value in property and possessions. During this time, the entrepreneur also raises a family, pays off a mortgage, buys a lakeside retreat and plans to retire via personal savings and the sale of a most valuable asset – the business. Of course, during the timeline above, there will be bumps and bruises along the way. There will be management challenges such as the key foreman who needs to be ‘let go.’ There will be seasons with a shortage of skilled help. Recessions will bring competition from laid-off factory workers with a chain saw as their only arboricultural qualification. The road to success won’t be easy as there will also be inconveniences involving matters such as a few equipment thefts, vehicles accidents and possibly a minor liability issue or two.

Over the years, I’ve had the opportunity to work with both the young entrepreneur filled with dreams and goals as well as the established business owner looking forward to cashing out and relaxingly enjoy life’s remaining days. What is concerning is that these individuals with very different perspectives toward their business often carry similarly structured insurance coverage. The young entrepreneur protects cash flow by insuring revenue-generating equipment and vehicles using low deductibles as well as scrimping on liability coverage by buying only what is legally or contractually necessary. It can be quite concerning to find that the established business owner is often doing the same!

It often appears that the mindset of experienced management perceives the status quo to be satisfactory. “This is the way we have had things arranged for 30 years” is a common statement. Apparently, while the business has matured from a cash flow to asset based operation, their insurance philosophy has remained focused on protecting cash flow. Sure, there are now 20 trucks insured instead of just two, however all that has happened to the insurance cover is to include these units as additions. The scope of protection itself hasn’t been restructured. During the same period, pollution laws have gone into effect, societal attitudes on ‘expert advice’ have expanded and court awards have risen exponentially. an established business should differ in its insurance philosophy. This will often involve coverage that wasn’t as important in years past. After all, the 30-something entrepreneur still has time to declare bankruptcy and start again while the 50-something business owner does not.

In many cases, a strategically arranged insurance portfolio costs little more, if at all. The established business, with multiple locations providing spread of risk, can self-insure its inventory of small tools and with money in the bank it can afford to increase equipment and vehicle deductibles. The premiums saved can then buy broader liability protection such as an environmental policy, errors and omissions coverage or employment practices insurance. As an example, environmental insurance should be a priority of the established business owner. However it is often that only a pesticide endorsement is bought as part of the general liability coverage because that is what has been done for years and all that the Ministry of Environment mandates. However, pollution issues should be recognized as a matter of ‘absolute’ liability able to attack the personal assets of a business owner through the protective shell of incorporation. As one cannot run and hide from accidental pollution issues, they deserve special attention.

Review of the insurance philosophy directed toward your business should ask two very simple questions: 1) Where along the path of life am I? and 2) Am I trying to protect a source of cash flow or my assets?
Once the intentions are known, select an insurance broker who understands your industry and will take the time to understand your business. You can then work together to identify risks and strategies to minimize concerns including insurance protection that is structured in ways that provide security to your current position in life, not your circumstances of decades ago! ©

— Scott McEachern can be reached at or 1-800-240-7055

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