From The DailyBull: Bonding & Insuring A New Company

I want to start a company. The idea is to install fancy technology in the homes of rich people – things like programmable LED lights, smart thermostats, rasberry-pi based devices to automate pet feeding, etc. Like your cat business, it will require going into the homes of my clients. I plan to do a test phase before I look at hiring employees. Do you think I need to get bonded & insured at this stage, or can that wait until I want to officially launch?

I love this idea!

The purpose of bonding (by the way, if you google this, you’ll get all kinds of information about fixing gaps in your teeth and making your infant love you) is to help “ensure that the job you’ve been hired to do is performed and that the customer is protected against losses from theft or damage done by your employees.” (Link.)

If you’re performing the work yourself, it doesn’t really make sense to protect yourself from the possibility that you might steal your customers’ shit, you know?

From the same link: “Although you still have to pay on claims if your employees are bonded, bonding has the side benefit of making your business more desirable to customers. They know that if they suffer a loss as the result of your work, they can recover the damages from the bonding company. The difference between a bond and insurance is that a bonding company ensures your payment by requiring security or collateral if a claim is made against you.”

So, if you are a one-person shop, it’s hard to see how that would benefit you.
It may be worth having insurance in the eventuality that you mess up someone’s house while installing equipment, or are sued for something like someone’s cat died because the cat fountain you installed went kaput in the middle of someone’s European vacation. I’d be very careful that any insurance policy you get would cover such circumstances.

That said, while lawyers and insurance salespeople might vehemently insist that you should have insurance (and incorporate, and protect your trademark, and use more legal services, etc.), if everybody actually did all these things when starting up, no one would ever bootstrap anything. Also, a lot of people drop ten grand getting all that shit done and then never really bother to actually get customers and do stuff. I suggest the opposite.

(Unless, of course, the cost of insurance is negligible to you. Last year, I paid about $300 for catsitting insurance, $150 for conference insurance, and about $2,800 for insurance for a seminar business. I think the reason was that the seminar business was something the insurance policy didn’t have a standard policy for, so they had to have me fill out endless forms before writing me a policy.)

If it were me, I wouldn’t worry about ANYTHING — insurance, bonding, website, branding, trademarks, incorporating — until I had tested out my idea and made sure there was a market and I could be profitable. (Google “Minimum Viable Product” for more on this idea.) For a service business, make sure you can make money before you start spending it.

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