It’s hard to have a successful business without a healthy Sales and Marketing operation. As a business grows so does the complexity of protecting product production, sales, and marketing from liabilities and vulnerabilities. Yet many business leaders go blindly at it alone “not knowing what they don’t know” leads to mistakes.
“Learn from the mistakes of others. You can’t live long enough to make them yourself.”–Eleanor Roosevelt
Welcome to the next installment in our Business Health Series: Sales and Marketing. In each part, we dive into how small businesses and entrepreneurs level the playing field with megacorps and boldly make the decisions needed to protect and grow their businesses by leveraging contracts, insurance, and entity structure as a strategic advantage.
Sales and marketing game plan
If your business is unable to get products to market and attract customers, it’s game over.
Like a pro football team, winning starts with a good coach and strategy. The risk management playbook for sales and marketing brings in offense (contracts), defense (insurance), and special teams (entity structure) to help mitigate and understand the risks.
Let’s see how having these three tools impact not only revenue or the goods and services a business offers but also the channels in which the business sells those goods and services.
Contracts play a significant role in the production and sales cycles of your business. Following the football metaphor, contracts are like a winning offense (sorry Seahawks). When done right, contracts set up the expectations of each role and agree on a playbook.
A contract could be made between your business and a manufacturer, supplier, or a customer to ensure all players execute the game plan.
Types of contracts
Each of these different contract formats can accomplish essentially the same thing through different means. Each format sets the parties’ expectations of the relationship and provides guidance for a dispute resolution process should an issue arise.
How a contract plays out
Let’s say your company sells a good or product in a public marketplace. Your company’s contract with the product manufacturer should allocate responsibility accordingly, with liability for flaws or defects arising during the manufacturing process being allocated to the manufacturer of the product.
Thus, the first line of defense in a manufactured products liability case is the contractual agreement between the manufacturing entity and your company, which requires a well-drafted contractual agreement that serves to protect the retail company from liability against those claims.
You should always ensure that you know what you’re signing, even when it appears that you can’t change the terms of the contract. In these types of sales contracts, you will want to be sure not only that your commitments are reasonable but also that your liability is appropriately limited. If you are the party who leads these conversations and negotiations and you know what you need to have in your contracts, then you will have the upper hand.
In the sales and marketing risk management playbook, insurance is like a championship defense (Seahawks, The Legion of Boom (LOB) was the Seattle Seahawks circa 2010s).
In a general sense insurance means protection from financial loss or as a way to manage risk. And there’s a lot of risk associated with having a business. Even with the business structure like a limited liability company (LLC) or a corporation the protection you get from lawsuits can only cover your personal property, but even that could only give a limited protection as well.
Insurance can fill the gaps to make sure both your personal and your business assets are fully protected from these risks.
Insurance protects businesses from liability that may arise in the manufacturing process, during the delivery of products, or when furnishing services. Certain policies covering areas such as malpractice, errors and omissions, and product liability are commonly held by businesses to protect against product and service failures. In more recent years, cyber security has also become a necessity to ensure the protection of both your own and your clients’ data during the delivery process of any goods and services.
How a insurance plays out
Let’s look again at the earlier scenario in which your company sells goods and there is a claim for defects arising from the manufacturing process of the goods. Perhaps your company’s contract with the manufacturer did not adequately delegate the responsibility of that product liability to the manufacturer or your company had no written contract and instead relied on a verbal representation by the manufacturing entity.
Your company’s insurance policy would be your next step in protecting your company against such a claim. Many insurance policies provide coverage for products liability, in which case your insurance company may pay out the cost to cover resulting damages stemming from the claim. Having insurance policies such as this in place will provide additional protection for your company in the event that your contracts alone cannot mitigate or prevent liability.
In the sales and marketing football playbook metaphor, your business entity structure is like special teams. Well, sort of. In the age-old debate of “offense or defense” that win championships, special teams are rarely credited for wins, but when they fail, they make for ugly losses.
The role of Entity structure
The entity itself protects the business owners from claims that may arise from the products and services they sell, and which are not covered by either the contracts or insurance.
The entity is also responsible for implementing and maintaining compliance with laws and regulations, including the constant evolution of the privacy landscape as well as recent sales tax collection requirements. By staying abreast of these changes, you will be prepared to accelerate and thrive while others are still trying to catch up.
How a entity structure plays out
Again, going back to the example of a products liability scenario where your company, having sold a good or product, later has a claim brought against it for a defect in the manufacturing process. If your contracts are unable to sufficiently allocate the liability of such a claim, and your company either does not have insurance coverage or if the insurance policy your company does have does not extend to products liability coverage, then the final step in protecting a company’s owners is the entity itself.
The type of entity that your company has formed will have an effect on the protections it can offer to the company’s owners. A limited liability company or a corporation, for instance, would serve to shield the owners from being held personally liable for damages stemming from a products liability claim. A creditor or judgment against the company for such a claim would need to seek damages or relief from the company itself, rather than the individual owners in their personal capacity. If you had a sole proprietorship or partnership structure instead, then such protections would not be offered to the individual owners of the entity who could be found personally liable for the obligations of the company.
Equinox the playing field
Sales and marketing is a playing field where your business must compete and win. It’s important to learn from other’s mistakes and tap the strategic advantage of a sales and marketing risk management playbook that covers contracts, insurance and entity structure.
Since each business’ needs are different, you need a plan that will work with your team’s and player’s strengths and weaknesses. Complete a complimentary, no-obligation Business Health Assessment evaluation to identify needs and uncover gaps in your business processes and compliance.