Small business owners’ needs run large

July 2, 2007

Small business is big and getting bigger. Some 6.4 million businesses with one to 20 employees now contribute to our economy, and this segment continues to grow at a record pace. Everyone — the college graduate, the corporate refugee, the new citizen, and the early retiree — seems to be thinking about starting up a business these days, and judging by the numbers, many will do it.

The Hartford recently reached a milestone of having one million small business insurance policies in force across the country. The company achieved this goal by offering a wide range of products and services along with technology that helps independent agents more easily serve their clients. But for any carrier and agency, success in the small business segment depends on more than just products and technology — it also means developing a deeper understanding of the small business owner’s needs.

Many individuals start up a business to pursue their passion or become their own boss, or even both. However, following one’s dreams can also come with a price. According to a February 2007 study by MasterCard, small business owners worldwide work between 40 to 68 hours per week. Yet other studies show that despite their long hours, business owners often feel they do not have enough time to take care of important business details.

This frustration may sound familiar — many insurance agencies are also small businesses facing similar pressures, including the struggle to keep up with demands on their time. In fact, smaller agencies may have a certain advantage over their larger counterparts when serving small business clients because they are typically working through the same issues. Whatever their size, though, savvy agents should embrace this growth market and serve it as fully as possible.

A spectrum of client needs

Earning the trust of a client requires time and effort, and remaining committed can pay off. Once they’ve established a partnership with a smaller client, an agent has the potential to parlay one property and casualty sale into other opportunities. After basic needs like fire, business interruption and general liability exposures are addressed with a business owners policy (BOP) and a workers’ compensation policy, agents can then discuss other relevant risks.

For example, any business with employees has employment practices liability (EPLI) exposures that should be covered. Professional liability coverage is also important for certain industries to have in place, particularly in the fields of business services, accounting, law and technology. The personal lines market also offers additional prospects as a small business owner usually needs to insure a home and cars, and may welcome the chance to work with one trusted partner instead of several.

Moreover, the insurance needs of a small business owner don’t stop in the property and casualty sector. Two relevant life insurance coverages, disability insurance and key person insurance, which compensates a business for the death of a key employee, can be a natural part of any conversation raised by a property and casualty agent licensed to sell those products.

A divide has traditionally existed between agencies that sell property and casualty products and those that sell life, financial services and health products. But that gap is narrowing as agencies see value in meeting a client’s entire needs. After all, the same demographic trend of aging Baby Boomers that helps drive the growth of small business start-ups also drives the demand for annuities, 401(k)’s and other wealth-management products. Profitability and business retention could very well increase for property and casualty agencies that also have in-house life or health expertise, or work closely with an agency specializing in those products. Certainly, from the client’s standpoint, it can make a lot of sense to work with a single source when it comes to protecting their business and growing their assets.

A ‘playbook’ for business owners

The Hartford, recognizing that business owners need help making productive use of their limited time, recently created an educational guidebook for business owners that can also serve agents well in both their personal role as a business owner and their professional role as an adviser. The 40-page booklet, “The Business Owner’s Playbook: A guide to protecting your business, growing your assets and planning for your future,” contains practical information on a wide range of business and personal finance topics.

The guidebook is organized into three sections for companies that are emerging, growing or transitioning to another owner. It covers areas such as business structure, finance, compensation, benefits, insurance, retirement and estate planning.

The section for emerging companies, for example, provides a worksheet to calculate start-up costs and a list of funding resources to explore.

The section on growing companies discusses how business owners might consider expanding their coverages and how to prioritize their needs and resources.

Finally, the section on transitioning companies includes a description of four major types of sale transitions and discusses how a business can decide when it is ready for this phase.

An October 2006 study by The Hartford shows that nearly 40 percent of business owners with 100 or fewer employees find it difficult to prioritize insurance options through the various stages of their business development. Given this reality, the Playbook should be a welcome resource for any business owner.

While it provides a great deal of valuable information, The Business Owner’s Playbook is not a replacement for expert advice. It is meant to be a conversation starter to encourage businesses to seek out the services they need from the right types of professionals. For owners of emerging businesses, those professionals could include a CPA, a lawyer, a banker and an insurance expert. By the transitioning stage, that network of professionals might also include a business appraiser, an investment adviser, a business broker and a strategic partner or venture capitalist.

Agents and business owners interested in The Hartford’s Business Owner’s Playbook can order or download copies free of charge at

In the dynamically evolving small business landscape, this booklet can help as agents work to grow their own business while they understand how to best serve their clients.

Topics Agencies Commercial Lines Business Insurance Property Property Casualty Casualty Small Business

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