Mitigating Risk as a Business Owner - Your "Must Know" Tips
Health and wellness professionals, such as health coaches and nutritionists, incur significant risk in the context of starting their own business. If you google “quotes about risk”, then you will see a long list of great people who believe risk is a critical factor in the success of a business. Some of our favorites include:
“Be brave. Take risks. Nothing can substitute experience.” Paulo Coelho
“There are risks and costs to action. But they are far less than the long range risks of comfortable inaction.” John F. Kennedy
“We can’t get anywhere in life without taking risks.” Esme Bianco
Surely though these great thinkers cannot mean that all risk is made equal. For example, Warren Buffet has said that “risk comes from not knowing what you’re doing.” Not exactly the most inspiring words from the Oracle of Omaha.
So that begs the question what level of risk should these health and wellness professionals tolerate? The answer to this question is going to be a very individualized answer that depends on many factors specific to you as a business owner. And what steps can they take to mitigate unnecessary risk? In this post, we explore five risks business owners commonly face and propose some ways to minimize them.
The Risk of Failing to Form an Entity
The First Risk is to a health and wellness professional’s personal assets. Although forming an entity will require the business owner to incur costs of formation and possibly annual franchise tax fees due each year (depending on the state of formation), it can be especially risky to operate a business without forming a limited liability entity. When one properly conducts business under the protection of a limited liability entity, the owner’s personal assets are protected from claims. There are countless stories of entrepreneurs who personally go bankrupt following an accident in their business that hits them with a claim against them personally since they do not have an separate business entity. This means their bank accounts, their personal belongings, and anything they own of value (depending on their state of residence) are up for grabs if the claim against the business is successful. If you are currently practicing without the coverage of a limited liability entity you can check out our guide link that covers the basics of entity formation.
Lack of Contractual Protection
The Second Risk comes from how you define your relationships with your clients. Health and wellness professionals can change people’s lives and the impact created by health and wellness professionals on their client can last a lifetime. However, before you begin to help your clients you have to set the rules of the road to limit your liability from a potential suit, protect your content from misuse, and define what will happen if the client does not pay on time, to name a few things. Moreover, you have to set up what services you will and won’t provide for a client (see the Fifth Risk below). This should all be done with a contract that sets out everything in clear language. If you are currently operating without a contract or want to make sure your contract is airtight, we offer a DIY template that we have tailored for one-on-one client relationships here and group coaching agreements here.
Unnecessary Risks of Operating an Online Business
The Third Risk comes from how you define your relationships online. Your website and social media pages are great places to reach new clients and make a first impression. However, as a health and wellness professional, you want to make sure that you are not offering medical advice or advice tailored to an individual’s particular situation since you have no control who will be visiting your website or social media. In any capacity in which you are offering nutritional advice or tips online, you should include some sort of waiver of liability. We have you covered from a website perspective with our Website Policy bundle which you can find here. For a free social media disclaimer, make sure you sign up for our Legally Ready Guide.
Forgetting Business Insurance
The Fourth Risk is being unprepared if there is a claim ever made against your business. Even those who take great care in how they work with clients know that things can go wrong and a relationship with a client can deteriorate to the point that litigation may ensue. For example, it is common advice amongst doctors that they will have on average about one major malpractice claim during their career. One of the best ways to mitigate the risk of the financial damage a claim could cost you is to get insurance for a rainy day. Insurance coverage can protect you against successful claims and provide the funds necessary to fight the claim (which keep in mind can be brought in any situation – even if its unwarranted). If your doctor has practice insurance, you should consider getting some business insurance as well! Alternate Balance can be a great one to consider for health and wellness practitioners.
Practicing Outside Your Scope of Practice
The Fifth Risk is operating your business outside the scope of practice provided by your credentials or licensure. The laws regarding what practitioners may do in a state vary greatly. Moreover, if you practice in a state that requires licensure to offer nutrition advice, you may need to tailor your scope of practice to fit into a statutory exception if you are unlicensed. Thankfully we are here to help! Check out our Scope of Practice and State Nutrition Law webinar for health coaches and unlicensed nutritionists here.
Phew! There is a lot to do as a business owner to mitigate unnecessary risk. Whether that be forming an entity, creating your contracts, disclaiming your online advice, or finding insurance coverage, business owner’s must be vigilant to mitigate the risks they are taking. The risk of starting your own practice should not mean risking your home or personal assets! Moreover, it should not mean leaving your business open to bankruptcy due to a claim that could have easily been prevented or limited.
Do not let inexperience or lack of knowledge be the source of your risk. If any of these concepts are new to you, please take advantage of our resources linked throughout the post!
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