The Hard Market Is Here

by Katie Petersen | Dec 6, 2022 | Risk Management | 0 comments

The Hard Market is Here

Written by Eric Petersen, CIC

Like most industries, the insurance industry has market cycles. The insurance industry uses the terms “soft” and “hard” to describe the particular economic conditions the industry at large is enduring. As a whole, the insurance industry has been operating within a soft market for most of the past decade. In a soft market, insurance companies are more willing to take risks by insuring businesses and individuals who may not meet an exacting underwriting criteria. They also typically do this for a cheaper cost than during a hard market. The soft market creates a greater competitive situation for insurance companies and therefore the insurance customer will get better coverage for less money.

The flip side is a hard market, where insurance companies become more strict and rigid with their underwriting requirements and prices go up to reflect their discomfort with the risks that they are insuring.

Now while some may argue that insurance for tree care companies (especially General Liability and Workers’ Compensation) seems locked in a perpetual hard market, all indications point to a hardening market for all tree care insurance coverage lines coming in 2023.

There are many factors that contribute to why the insurance market hardens, but here are the most common factors:

Insurance Company Investment Income – In a perfect world, insurance companies will make their income from their investment portfolio, versus from their underwriting revenue. When investments are not growing at an acceptable rate, insurance companies need to make up the lost income by raising their rates for coverage.
Economic Uncertainty – Like most other industries, the insurance industry does not do well with economic uncertainty. The unknown of what is coming typically makes insurance companies protect their financial strength by increasing their rates to balance out losses to their company, whether that be from future claims, inflation costs to existing claims or from past claims being reopened.
“Social Inflation” – Today’s legal climate is unpredictable in many ways and leads to what insurance experts call social inflation. Large jury awards (otherwise known as “nuclear verdicts”) raise the potential for a minor accident to turn into a multi-million dollar case. Insurance companies have been on the front end of these social inflation claims for many years now.
Loss Ratios – When an insurance company is paying more dollars in claims than they take in from premium, their loss ratio begins to swell and the company loses money. Large weather events that produce widespread damage are a major contributor to loss ratio problems across the country.

So what can you do about the upcoming hard market to minimize the impact to your company?

Up your Risk Management Game – You’ve heard us talk about how purchasing insurance is only part of risk management before, but it becomes even more important when the insurance industry is in a hard market. Identify what areas of your business could be improved to reduce the likelihood of an injury or accident happening and then implement a plan to take action upon that risk. Seek help from your insurance agent and insurance company on what proactive risk management activities will have the most impact upon your insurance rates.

Explore Self Insurance with Intent – Every insurance claim that you file has an adverse impact to your insurance cost. Look at increasing your deductibles so you aren’t as willing to file a small claim as well as find areas within your insurance coverage that you can self insure, think small tools/equipment or the physical damage on older vehicles. A lot of little insurance claims will have a much greater impact on your insurance cost than one large one.

Explore Non-Traditional Risk Transfer Options – Captives or self-insured funds become more attractive to larger tree care companies when the insurance market hardens and traditional insurance programs cannot offer stable rates and terms. There are many different options to explore so work with someone who understands each of the options available to help you select the appropriate one for your business.

Choose the Right Agent – Ensure you are working with an agent who actually understands your business. Your agent is the first line of defense versus large premium increases and insurance market instability. They will know when an insurance rate increase is fair and justified and when it is out of line. They also will know how to position your business to the insurance company to receive the lowest possible rate.

Understanding what a hard market is and how to minimize the impact to your company can be a huge difference maker in your profit margin. Make sure to ask plenty of questions when reviewing your insurance policies with your agent at renewal time. And while no one knows for sure how long or severe a hard insurance market will last, they typically are shorter in length than a soft market. If you have any other questions on what the changing insurance market means for your business, please contact an ArboRisk team member today.

Business Planning Q&A with Jim Skiera and Kevin Martlage

by Katie Petersen | Nov 28, 2022 | Business Strategy | 0 comments

Business Planning Q&A with Jim Skiera and Kevin Martlage

Written by Eric Petersen, CIC

We all know how critical business planning is for your organization, yet so many business owners get frozen by the mere thought of it. To help our readers understand business planning better and how to make planning a reality for their company, I went to the business strategy planning experts from our Thrive team, Jim Skiera (JS) and Kevin Martlage (KM).

What is the most important aspect of Business Planning for a tree care company?

JS – Taking the time each year to do it. It’s surprising how many companies don’t have a business plan. Step one is realizing the value of business planning and step two is committing to doing it every year.

KM – Great points Jim, I would also like to add that I am always surprised at how many tree care companies’ plans are not strategically developed and in alignment with their company’s “why” and purpose. It is extremely important to develop a business plan for your company to ensure you are pursuing the ‘why’ strategically and fiscally responsible. Another key area is communication. Once you have a plan, let your team know how they can impact the plan and make the plan happen on a daily, weekly, monthly, and annual basis.

What is the hardest part about planning?

KM – Getting started on the development and then ensuring that it is properly communicated, understood, and impacted by those responsible for making it happen. There is a huge myth out there that business planning is difficult and takes some magic approach and formula to make it relevant and attainable. While there are some nuances that should be considered, the approach to developing and implementing an effective business plan starts with committing to making it happen. Intentionality and commitment to the development and need will help the team ensure that a plan is created and is ultimately relevant and sustainable by the organization.

JS – I agree with you Kevin, for most it seems to be just getting started. Often people in the tree business do not have a business background. They know how to care for trees but often don’t know how to manage and care for a business. If you are an accomplished arborist you went through a learning process to become one. You took the time to learn the standards and best practices that guide how you approach and plan how you prune or provide other care for trees. Approach business planning in the same way. When you were new to tree care you likely worked for someone or with someone that mentored you. Find a business mentor to help you get through it the first time. There are plenty of good business people out there and most enjoy helping others succeed. You can find free business plan templates online to get you started.

One of the challenges of running your own business is remaining objective with your expectations. Having a mentor who is willing to ask tough questions about your assumptions and goals will help you develop a stronger plan. It will also prepare you for your visit with your banker should you need to apply for lines of credit or loans.

What differentiates Strategic Business Planning from Annual Business Planning?

KM – Strategic planning typically has a longer time frame and it focuses further into the future (typically 3 to 5 years). Annual business planning is still strategic but is focused on the performance of the past year and what needs to happen in the near future (next year) to help achieve the overall longer term strategic plan. Both are equally important, with the differences falling primarily on the time frame being planned for.

JS – A strategic plan has a longer planning horizon, that sets future business expectations and establishes the strategies to be used to meet those expectations. The annual business plan is more tactical, establishing the tasks, responsibilities and resources required to achieve those long-range goals.

What is the most common objection you hear to doing Business Planning?

JS – I don’t have time to write up a business plan, I’m just too busy.

KM – Yep, the time objection is the largest objection I hear as well. “It takes too much time and we do not have time to “worry” about trying to get something else completed”.

Additionally, for those that have a business plan, there is also an objection and issue with making sure the plan is kept alive and remains relevant to the organization. Too often, organizations develop a great plan only to get busy and focused on the day-to-day “fire drills”. This always has a negative impact on the plan effectiveness and eventually leads to more lost time and course correcting that if the plan was followed and executed in the first place.

What is the largest myth or misconception about Business Planning?

KM – “We do not need a plan; we are already extremely successful just by taking care of our customers”

“Planning it too time consuming and we do not have the time.”

“I do not know where to even start even if I had time to create a plan.”

“Plans are too confusing and only company leadership/owners need to have a plan. It is not relevant to me.”

All comments I have heard firsthand, but are extremely detrimental to every organization in my opinion. If done correctly, business planning can take your company to the next level while making sure you remain relevant, sustainable, profitable, and a great place for your employees to continue working.

JS – The reality is every business has some form of business plan; it just may not be written down. For a small company it may be in the owner’s head, and the risk with that is if something happens to that person the business fails.

What is the easiest way to start a Business Planning session for a tree care company?

KM – Schedule 1 one-hour-long meeting with the leaders of your organization to talk about the current challenges and successes you are seeing. During that discussion identify the top 3 areas you are challenged with as an organization and the top 3 areas you feel you are succeeding in. Next identify 1 thing you will do to maintain and support the successes and 1 thing you can do to address the challenges. Commit to meeting in 30 days to see how you are doing with those items and to continue the conversation.

The point is, if you simply begin the conversation, you will quickly understand how important it is for your company to plan your next 1-5 years and you will see how engaged your team will be in having these relative conversations. Conversations about how to improve the overall effectiveness of your team and ultimately your company. Whether planning is done formally or informally, the most important first step is to begin talking about it.

Another option is to reach out to the Arborisk Thrive team and engage in the Business Planning package which will help you organization walk through the steps while you continue to focus on your business.

JS – If you are going through it for the first time it may be wise to hire a consultant to help you write up your first plan. The consultant has been through it many times and can help move through the process efficiently. Because they have experience, they will ask you those tough questions and help you clarify your expectations and goals. Alternatively, as previously mentioned there are many free business planning templates available online. Start by filling out one of those templates and you can go from there. If you feel you need additional help the answers will help you identify where you need more assistance. Then if you do have a mentor or consultant review the plan with them and you will be off to a good start.

Thank you Jim and Kevin for a great conversation about business planning! Your collective experience is invaluable to ArboRisk and all of our Thrive clients. We are really appreciative to have you on the team.

If you are struggling getting started on an Annual or Strategic Planning session, reach out to an ArboRisk team member directly or enroll directly into our Strategic Planning Package today!

Elements of a Business Plan

by Katie Petersen | Nov 4, 2022 | Business Strategy | 0 comments

Elements of a Business Plan

Written by Eric Petersen, CIC

At ArboRisk, we often write about how critical planning and being intentional with your business is. Obviously the more focused you can be, the quicker you will realize your goals, but how does a company stay on track in a sea of opportunity that comes their way?

The easiest way is to create a business plan for you to follow.

In the simplest terms, a business plan is a document that will guide your business through the next three to five years. As an added bonus, a business plan can help you achieve funding from a bank to continue to grow your business.

While every business plan will be unique, there are some common elements that your plan should include. Working though each of these elements allows you to focus on your business and marketplace today and what you envision them both to be in the future.

1. Executive Summary – Even though this is the first section in the business plan, write this section last. The Executive Summary should be just that, a summary of your overall plan and why you are/will be a successful company. It is much easier to do this after you’ve written the other sections. If short on time, the Executive Summary should provide the reader the highlights necessary to understand where the business is heading.

2. Company Description – Start by describing your company structure, its management team and mission for its existence. Explain your organization’s competitive advantages and how your team is unique in delivering your service(s) or producing your product(s). This is the place in the business plan to brag about your business.

3. Services and/or Products – This section represents the chance to go into detail about the actual services and products you sell and the benefit your customers receive from them. Limiting the discussion in your plan to only your top 3 services or products will help you keep your focus on those strengths as a business. All too often, tree care companies get involved with providing so many services they do not become masters of any. It is only when a company specializes in a few select services that they truly provide value to their customers.

4. Marketing and Sales – Nothing happens for your company unless a sale is made. And you won’t make any sales if you don’t have a marketing plan to let people know who you are and the benefits that your company provides for them. This is where you explain your sales process, customer journey and post-project communication with your customers. Analyzing your market (local competitors, customer demographics and regional economics) in this section will transition you nicely to discuss your marketing efforts. Discuss your strategy for reaching your customers in-person and in-print, whether on paper or digitally.

5. Financials – The final section of your plan will include financial numbers. Use either projections on sales and expenses or a summary from the prior two years to explain the financial position of the company. This section presents your chance to request funding and explain where the funds would be directed in the company.

There is no one correct way to write a business plan, but incorporating the above sections into your plan will allow you to create a powerful document for your business to follow. If you are struggling with creating a business plan or setting the strategic direction of your company, sign up today for ArboRisk’s Strategic Planning Package or Business Finance Package.

Keeping Your Strategic Plan Alive

by Katie Petersen | Oct 24, 2022 | Business Strategy | 0 comments

Keeping Your Strategic Plan Alive

Written by Kevin Martlage

Over the past year, ArboRisk Insurance has published numerous articles about how to strategically advance your company. Primarily we have focus on developing a strategy around supporting your team, your leaders, and the business culture necessary to successfully advance your tree care company. In an article ArboRisk published on October 28, 2021, “Why is Strategic Planning Important”, I wrote about the importance of developing a strategic plan that not only validates the “why” of your organization, but also the steps you can take to achieve the “why” and your goals.

An impactful strategic plan is one that helps to ensure your current path is sustainable, profitable, and most importantly helps you achieve all that you can as a company. When developing a strategic plan, you must ensure you have clear goals in place for the next 1-3 years as you continue to build your company and your team? If not, you will certainly end up somewhere in the future, but is that where you want to be and have you achieved all you can achieve as an organization?

Before we talk about how to keep your strategic plan alive and relevant, I’d like to recap the process we recommend following as you develop a strategic plan. When leading organizations through the strategic planning process there is typically focus on five key areas:

Confirming the “Why”
Reviewing performance and current state
Identifying what is possible and where we want to go
Determining how we will get there
Implementation and monitoring

The outcome of the strategic planning process is several short term and long-term goals that will help the organization achieve the overall mission, or “why,” of their organization. Additionally, you then must develop an operational plan and budget that supports the goals that have been identified. This is done in numerous ways, but usually by focusing on the following key questions that will help you dive into your company to see what is needed to achieve each goal:

What resources are necessary, and do we currently have those resources?
Do we currently have the staff needed to make these goals happen?
What are some potential roadblocks that we need to proactively identify?
What are some other outside resources and knowledge that we may need to engage?

Whether you go through the strategic planning process internally as a team or have someone help facilitate the development, every organization is then left with the question of “now what”? As an organization you have spent time developing this iron-clad strategic and operational plan that will take you to the next level, but other things always seem to get in the way of making it happen. Those things are what I like to call unintentional noise which always seems to interfere with the implementation and effectiveness of the plan you just spent time creating. So how do we eliminate the unintentional noise and effectively implement and carry out your plan?

A Harvard Business Review article, “4 Common Reasons Strategies Fail” published June 24, 2022 outlines some reasons why strategic plans fail. Specifically, it notes:

“…60-90% of strategic plans never fully launch. The causes of derailment vary widely, but execution consistently bears the blame.”

I cannot tell you how many organizations I have worked with, and have worked for, where the strategy was not understood, and therefore never fully executed across all levels of the organization. In some instances, the developed strategy and operational plan is not even understood among the leadership team that developed the strategy in the first place. All too many times a strategy is developed, and the plan gets put on-the-shelf to be dusted off 3 years later or when it is determined that the organization is not heading in the right direction. When it is finally dusted off, it is realized that the answers were right there all the time. If the plan would have been followed the organization would be closer to where they now think they should be than where they are. This may sound extreme, but it happens all the time and creates lost time, extra expense, negativity towards the business culture, and a negative impact on your ability to serve your customers. So how as an organization do you ensure execution and delivery of the strategy that you and your leadership team so carefully developed? The answer starts with communication and understanding.

Every company has their own resources, budget, team and “why,” however how they keep their strategy and operational plan alive can be the same regardless of the size and direction of your organization. Here are a few steps I recommend you consider for implementation to ensure you keep your plan alive once developed:

Communicate your plan to the entire organization and ensure their understanding
Determine operational champions/leads for each functional goal to assist with oversight
Develop, communicate, and review key performance indicators (KPIs) for each goal
Review expectations and confirm understanding of key deliverables
Integrate KPI monitoring, updates, and performance review into all staff meetings
Align meeting agendas to include strategic plan performance and general updates
Align impact areas and KPIs to each specific job or functional position within the organization
Integrate strategic categories and updates into your annual review process
Review the validity of your plan annually and adjust as necessary ensuring changes are communicated and understood

The more you can integrate some of these items into your standard operating procedures, the more effective they will become in helping to keep your plan alive. Integration of some of these items can be easy depending on your company. For instance, can you create a standard meeting agenda template that always includes a strategic plan performance and impact update? Depending on your IT capabilities, can you create a KPI dashboard that is updated in real time and aligned with the strategic categories and goals of the organization. How about a weekly or monthly, CEO/Owner newsletter, webinar, or lunch and learn focused on strategic plan performance and updates.

How you approach keeping your plan alive is up to you and your company leadership. However, the most important thing is that you implement the plan and then keep it alive through consistent and intentional communication and follow up. Ensuring that a solid strategic and operational plan is kept alive will help your organization continue to have the support and ability to achieve your goals. Communication is key in this phase of implementation and monitoring. The entire team must be aware of the plan that was created to ensure that everyone is driving to the same place on the map and understand where they are on that map. It is up to the leadership of the organization to ensure that a clear understanding of the plan is in place and that everyone on the team is aware of how they impact the plan daily, weekly, monthly, and annually.

If you are interested in learning more about how strategic planning can enhance your organization,I encourage you to look at our Thrive Risk Management Strategic Planning package. In just four short weeks we can help you identify who you are as a company, what you want to become, and what strategic milestones will be needed to achieve your goals and ensure your team is all driving to the same destination.

Business Income for Your Tree Service

by Katie Petersen | Dec 10, 2021 | Business Strategy | 0 comments

Business Income for your Tree Service

Written by Mick Kelly

I’ll start this week’s tip with a question: Do you have a piece of equipment or a vehicle that you can’t operate without and would be hard to replace in the current market?

If the answer is yes, you do have an essential piece of equipment or vehicle and you know it would be hard to replace today, then Business Income coverage is something you should consider strongly.

What is Business Income Coverage?

Business Income Coverage (BIC), otherwise known as Business Interruption Coverage, will replace lost income, in the event of a covered loss to your business property, business vehicle(s) or equipment.

Who needs it?

Anyone who relies on a certain building, vehicle or piece of machinery in order for their business to operate and generate income.

How much do I need?

This depends on how much you need the damaged/lost building, vehicle or equipment, how difficult it would be to replace them and how much revenue they generate for you.

While the calculations can be pretty extensive, I’ve provided an outline at the end of the article.

Business Income Coverage for Buildings:

In the tree care industry an example of Business Income Coverage for buildings is when a building that you use to kiln dry timber for firewood/lumber sales burns down and you don’t have another kiln to dry out your wood. Thus, you would be losing income for this shutdown in operation until the building is repaired or rebuilt. Coverage applies to loss of income suffered during the time required to repair or replace the damaged property. The Business income Coverage will take your pretax income and, based on the insurer, will pay out a replacement for that income until such time the building is repaired or the indemnity term is reached (usually 12 months).

How do I know if I have this coverage?

When looking at your declarations pages for the coverage, look under the property section for either: “Business income and extra expense coverage” or “Business income coverage form without extra expense”

Business Income Coverage for Autos:

BIC isn’t typically included on auto policies and probably isn’t necessary for all the vehicles in your fleet. To get paid out for loss to a vehicle, you will have to prove that another similar vehicle wasn’t available for rent/purchase and that there was a loss of income due to not being able to complete a certain job because you were without that vehicle.

While this would be a hard claim to make on a Ford F150, the same cannot be said for the grapple saw truck in your fleet or a specialty crane. These vehicles are very hard to rent or replace quickly and a tree service could very easily lose jobs if they don’t have this truck operating.

How should I apply for this coverage:

There are 2 options when applying for this coverage:

Listing specific vehicle(s) on your policy with separate limits of insurance for each item (example – 5 trucks, each with its own limit).
List two or more items under a single limit of insurance that applies to all losses to any or all of the listed vehicles damaged in a single occurrence. The insurance world calls this blanket coverage. This is typically more favorable and acts similarly to blanket property coverage allowing for a higher limit per vehicle.

Business Income Coverage for Equipment:

Again, BIC isn’t typically included on your Inland Marine policies or on scheduled mobile equipment and, just like with the auto policy, it may not be necessary on all equipment.

In the current market we have clients who are struggling to replace chippers and mini-lifts and unfortunately, without those pieces of equipment, they lose jobs to their competitors. The same two options are available for the equipment as are available for the vehicles.

Waiting Periods:

Instead of having a dollar amount deductible, BIC is subject to a time deductible, which is called a Waiting Period. This is where the insurance company does not pay for the first 72-hours after the incident happened. For an additional premium, the insured can select a 24-hour waiting period or no waiting period.

How to Calculate Business Income Coverage

Again, the calculation of Business Income Coverage can be complex, however, the minimum items to consider when choosing a BIC limit are: Operating Expenses (such as: Taxes, Payroll, Advertising), Fixed Expenses (for example: Utilities, Mortgages or Rent) and your Profit Margin. Follow the three steps below to calculate your coverage limit.

Calculate your total revenue.
Subtract your business’s expenses and operating costs from your total revenue. This calculates your business’s earnings before tax.
Deduct taxes from this amount to find you business’s net income. Your net income will be the limit that you can insure on your business income policy.

The world of insurance is full of little nuances that can make a huge impact on your company’s success and Business Income Coverage is one of them. If you have any questions on Business Income Coverage for your tree service, please contact an ArboRisk team member today or sign up for our Free Insurance Coverage Review to ensure you are protecting your business as best as possible. If you are ready to take the next step, check out ArboRisk’s Thrive Risk Management New Heights Package! Our most robust risk management package, our team of industry experts can help you focus on key areas to successfully grow your company.