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Time for Your 2014 Small Business Risk Audit

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If you're like most small business owners, you've been devouring "2014 predictions" articles by any analyst, guru or pundit with insight into what you can expect in the next 12 months. Now that you've had a chance to digest the forecasts, it's time to evaluate which of the year's events your business is ready to handle -- and which ones you need to prepare better for.

But before we get into the specific steps for doing that, it's crucial to note one thing: This process may be painful. It may be tedious. It may be uncomfortable. But it's necessary. It's human nature to put off looking at our faults (whether on a personal or business level), but if we don't do so, we're blind to the ways we're most likely to fail.

So set aside some time this week to ask -- and answer -- the hard questions within this five-step guide. It will be worth your while. If you tackle one of these areas each day for a week, the audit process won't seem overwhelming and you'll have a much stronger business by next weekend.

5 Risk Areas to (Re)Evaluate:

1. How's Your Office Safety and Security?

When was the last time you tested your office's smoke alarm and carbon monoxide detectors? Did your business grow this year? Are you cramming more employees (and machines and cords) into a too-small space? What kind of security system do you have?

These are the basic, most visible areas of business risk. Problems here are typically easy to identify and correct: replace old batteries, invest in cord organizers (or start looking at bigger offices), and start shopping for burglar alarms to keep your equipment safe when you're not in the building. Taking these preventive steps now can save you thousands of dollars in property damage, employee injury and lost equipment down the road.

2. Are You Ready for a Disaster?

NASA isn't being coy about what we should expect from weather in the future: more of the same. Which is to say, more extreme weather events like Hurricane Sandy, polar vortexes and mid-fall tornadoes that can cause widespread property damage for business owners and the suppliers they depend on.

The takeaway for small businesses? An emergency plan isn't optional. If you don't yet have a plan in place for how to handle the climate events (and other emergencies) most likely to affect you and your suppliers, today is the day to create one. A solid emergency plan should be available to everyone in your business and should require you to do most of the heavy lifting in quiet times so you're ready when a storm hits.

3. How Secure Is Your Data?

We hear it almost on a monthly basis: credit card numbers were stolen; identities were compromised. Insurance research firm Advisen called 2013 the cyber security "tipping point," and experts in the field agree that data breaches are not so much a question of "if" but of "when" for businesses. But Target, Neiman Marcus and other high-profile firms aren't the only ones that need to worry. A Verizon Enterprise study published last year found that fully 79 percent of all data breaches were "crimes of opportunity," meaning that hackers took action because they saw an easy access point.

The good news about this is that business owners can seriously cut their risk of a data breach by implementing basic data security measures like boosting password strength, being vigilant about installing software patches, running antivirus software and closely monitoring employee-owned devices used for work.

4. What's Wrong with Your Cash Flow?

Cash flow (or lack thereof) is one of the biggest sources of risk (and headaches) for any small business. If you've struggled with cash flow in the past, consider making changes this year. Set up payment plans for larger projects so you can avoid a feast-or-famine revenue cycle. Introduce (or update) nurture campaigns, customer retention efforts and new customer acquisition strategies.

If all these areas are strong, take a look at your prices. How did you initially set your prices? Do they actually reflect the value you offer your clients and the time you spend on your work? If you find you need to raise prices, the beginning of a new year is one of the most logical times to do so.

5. Does Your Business Insurance Still Protect You?

Any time your business changes -- by moving to new digs, hiring new employees, offering new services or increasing its revenue -- your risk exposures shift, too. If it's been a while since you purchased your business insurance policies; it may be time to check in with your agent to see whether your policies still protect you.

Depending on what kind of coverage you have now, you may be able to cover your new exposures by adding new riders (such as one for data breach protection) or boost your coverage limits without making dramatic changes otherwise.

Just be careful when changing policies -- if you do a full-scale shift or are uncovered for even a brief period of time, certain policies (like Errors and Omissions) may be voided and not cover you retroactively. Make sure you talk with a knowledgeable agent about all the options and results.

Ted Devine is the CEO of insureon, an online small-business insurance agent.