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Top 5 Risks for Business Consultants

Running a business is an inherently risky venture. There's a lot of possibility in the world of business ownership, and a lot of that possibility comes from the great unknown. As a business consultant, you don't usually face threats to your physical safety on the job, but your industry does expose you to plenty of risks to your bottom line.

Here's a look at five of the biggest risks that management, marketing, and other business consultants face every day.

#1: Data Breaches

#1: Data Breaches

If you're like most of us, you're probably sick of hearing about data breaches in the news. But the truth is that they're not going away. If you store client data on your servers, you could be a target for hackers. More significantly, though, if you work as an HR consultant, you can play a crucial role in preventing data breaches on your clients' systems. How? Studies show that a surprising number of data breaches are inside jobs caused by disgruntled employees. Many others are unintentional goofs on the part of workers. By dealing with HR issues before they become catastrophes and helping train your clients' employees in data safety protocol, you can help prevent costly breaches (and the professional liability lawsuits that might follow). If any of your clients are in healthcare, you may be required to meet HIPAA data protection standards (details in our blog post, "Can Business Consultants Have HIPAA Liability?"). Luckily, Cyber Liability Insurance may be able to help you manage your data breach risks in both cases.

#2: Dissatisfied Clients

#2: Dissatisfied Clients

In a perfect world, your clients would follow your advice to the letter and see the kind of results you predict. But we all know that we don't live in a perfect world. Hundreds of forces (and egos) are at play in the business world, and your recommendations may not get implemented as you outlined — which can lead to lackluster results and unhappy clients. Dissatisfaction can be a minor headache or a major problem, depending on how your clients handle it. If they decide to sue you for failing to perform your job adequately, your Professional Liability Insurance can cover the court costs.

#3: Fluctuating Income

#3: Fluctuating Income

Business consultants don't have the luxury of relying on the steady paychecks that those in nine-to-five positions enjoy, which can lead to significant variations in your revenue stream. With strategic management of payments, though, you can help minimize the stress inconsistent paydays put on your business. (For more tips on managing cash flow, see the blog post, "7 Tips to Help Consultants Manage Irregular Revenue.")

#4: Scope Creep

#4: Scope Creep

Picture this: you're wrapping up a project with a major client and looking forward to a big, fat paycheck. But before you're able to shut things down, the client asks you to look over "one more thing." Often it's a "little" thing. If consultants aren't careful about managing the scope of their work, requests like these can lead to hours of unpaid labor and resentment on both sides. One way to manage scope creep is to make sure the scope of a project is clearly outlined in a contract and that you have a policy in place for modifying your agreed-upon services.

#5: Car Troubles

#5: Car Troubles

While car problems can slow down a professional in any field, consultants can be particularly affected. If you depend on your wheels to get to clients' offices, make it to appointments on time, and otherwise be where you said you'd be, you can't afford to be without a car. But if you get into an accident while driving for your business, your personal auto policy may not cover the damages. Ask your agent about Commercial Auto Insurance to ensure that you'll have coverage that keeps you on the road when you need it most.

Risk Management for Business Consultants

While business insurance can help prevent the above risks from draining your business finances if and when something goes wrong, it can't prevent bad things from happening. To ensure that your business is as safe and sturdy as possible, it's essential to approach risk management proactively by introducing policies and paperwork that clarify expectations for all parties.

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