A Small Business Playbook for Leading Through Uncertainty

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Text, Wednesdays with Woodward (registered trademark) Webinar Series. 

A laptop on a desk, with text on the screen. Wednesdays with Woodward (registered trademark) Webinar Series. Travelers Institute. Travelers. Joan Woodward appears on a video call. 

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JOAN WOODWARD: Hi. Good afternoon, everyone, and thank you for joining us today. I'm Joan Woodward, President of the Travelers Institute. And I'm really delighted to welcome you to our program this afternoon. A quick note before we get started. I'd like to share our disclaimer about today's program. 

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Slide, Wednesdays with Woodward (registered trademark). A Small Business Playbook for Leading Through Uncertainty. Logos, American Property Casualty Insurance Association (service mark). Insuring America. A.P.C.I. dot org. Travelers Institute (registered trademark). Travelers. UCONN School of Business. M.S. in Financial Technology. MetroHartford Alliance. C.B.I.A. 

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So my friends, this is National Small Business Week, and a reason to celebrate the millions of small business leaders and entrepreneurs across our country. For the past 60 years, the U.S. Small Business Administration, the federal government agency tasked to helping small businesses pursue the American dream. It is celebrated this week, recognizing the critical contributions of America's entrepreneurs. 

There are activities taking place across the country, and here at the Travelers Institute, we are thrilled to join in the efforts with our own program exploring how small businesses can navigate in times of uncertainty like we have today. And it's all part of our long-standing initiative here called Small Business, Big Opportunity, helping to promote small business success. 

So we have two fantastic speakers with us today, including from the leadership of the U.S. federal government Small Business Administration, who I'll introduce momentarily. But right off the top, I'd like to thank our partners for today's program, the Master’s in FinTech Program at the UConn School of Business, the MetroHartford Alliance, the Connecticut Business and Industry Association, and the American Property and Casualty Insurance Association. Thank you and welcome to all of our members and their networks. 

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Slide, Speakers. Pictures of the three speakers. Text, Joan Woodward. Executive Vice President, Public Policy; President, Travelers Institute, Travelers. Antonio Doss. Director, Strategic Planning and Economic Development, U.S. Small Business Administration. Erin Rodliff. Senior Vice President, Small Commercial Underwriting and Product, Travelers. 

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So now we're going to get on to our speakers. We're thrilled to host one of our national leaders from the U.S. Small Business Administration. A very senior person is joining us today from Washington, D.C.

Antonio Doss is the Director of Strategic Planning and Economic Development for the SBA's Office of Field Operations. Through his federal career at the SBA, he has supported small businesses in several roles, including the Deputy Associate Administrator for Government Contractor and Business Development. So get your questions ready about government contractor. He's been in this business a very long time. 

He was also District Director for the Washington Metropolitan Area District Office and Associate Administrator overseeing the Small Business Development Center programs. So prior to joining the SBA, he supported underserved markets as a Senior Vice President at Bank of America. Thank you for being with us, Antonio. 

And next up, I have a colleague, a very dear friend and colleague of mine, Erin Rodliff. She's Senior Vice President here at Travelers, who serves as the company's Small Commercial Underwriting and Product Lead. In that role, Erin has oversight of underwriting, product, pricing, portfolio management of the small commercial business segment within Travelers. That's a lot. 

This includes the Select portfolio as well as oversight accountability for Northland, Northfield and Agribusiness specialty segments. All of this means that she has a close-up view of the risks that are impacting small businesses today. I'm sitting in Atlanta, friends, and I'm-- just spent three days at the RIMS conference for risk managers. And I will tell you, I talked to a lot of small business owners over the last few days. A lot of them are very optimistic about the economic outlook. 

So we're very excited to kick off our program with opening presentations from them both and then bring it back for a conversation with lots of Q&A with you, our listeners and our viewers. So please drop them in the Q&A. If you have a question, drop that in the Q&A at the bottom of the ribbon there. So I'm going to turn it over to Antonio, and he's going to spend some time talking about what's going on at the SBA. And then Erin is going to come on as well. Antonio? 

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Antonio Doss joins Joan on the video call. 

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ANTONIO DOSS: All right. Joan, thank you so much for the introduction and for the opportunity to share some time with you today. As you mentioned, since really 1964, the president of the United States has issued an annual proclamation announcing Small Business Week, which, again, recognizes the critical contributions of Americans, entrepreneurs and our small business owners. 

For us, it's really the most important week of the year at SBA because it's our chance to loudly and forcefully recognize the local small business owners and entrepreneurs and the essential roles that they play in our communities. This week is one of SBA's best chances also to reach Americans where they are and share information on a series of things that we're doing, including the comprehensive resources that we offer to small business owners. And today's event actually is just really another great example of how we're fortunate to be able to link with organizations such as Travelers to connect with all of you who are participating in today's session. 

One of the things that I think I want to also share with you, and I think this is part of the tone of our discussion today, is that under the Biden-Harris administration, we have had nearly 12 million people who applied to start a new business, making it clear that we're in the midst of a small business boom. And these numbers are really historic numbers, and something that's very, very exciting to be able to see that the number of people who are actively taking steps to create a business. And it made me think, as I've started to see this data coming forward, how some years ago there were some studies done that spoke to the importance of just the churn of businesses, people who are starting businesses being a good economic barometer to the health of a state's economy in the state domestic product. 

So it's encouraging to see that type of activity taking place because it's symbolic of the importance of building what I refer to as an entrepreneurial mindset. And for so many people, the path to business ownership is really a path upward in terms of their financial mobility and their security. So many of us, over our careers, have looked for a job. And the entrepreneurs are not necessarily looking for a job. They're looking to create a business and then ultimately create jobs for other people. 

So it's a very, very important element of, I think, our national economy and probably one of the things that helps distinguish the U.S. economy from some of the other economies, which are not faring quite as well. The robust nature of our small businesses is really, really important. 

So I also want to just share quickly an overview of SBA. I'm sure many of the participants have had some awareness of the Small Business Administration, but just to make sure everybody's got some good footing. So SBA, through our 68 district offices and our resource partners that are located across the country, we are pretty much everywhere you are, including the U.S. territories. 

So we supply and support the small businesses who are seeking to grow and mature their business, a range of programs, products and services. Entrepreneurial education is one of those critical pieces that we found-- that we offer that is really, really important to help strengthen the business acumen of small business CEOs. We continue to be a regular and important element to the health of small business through our access-to-capital programs. 

As many of you probably have-- were aware, particularly if you're a business owner who was in business anywhere after 19-- excuse me, 2019, then you probably heard of our Paycheck Protection Program and our Economic Injury Disaster Loan programs, which were really such a vital, important element of helping the small businesses deal with the challenges that were faced with the whole COVID-19 scenario. So we continue to do more and more with our small business support by providing access to capital, whether it's short-term working capital, credit lines or longer-term loans for equipment and real estate purchases. We are there to support and help to make that happen. 

And we do that really as an indirect method in some respects by guaranteeing loans that our lenders make. And so we're very focused right now on expending-- expanding lender participation, making it easier and less risky for lenders to use SBA so they can therefore lend more money to small businesses, and at the same time reducing complexity for small-dollar loans because small-dollar loans have been a bit more of a challenge here in recent years for a lot of entrepreneurs. 

I alluded a second ago to the entrepreneurial education component being such a vital element of what we do. And so, in addition to the support that we can provide to you through our 68 district offices, we also fund several other organizations that help small business owners improve their opportunities for success. And this includes organizations like SCORE, our Small Business Development Center network, Women's Business Centers. 

We have a Veterans Business Outreach Center program, which has been expanded along with the Women's Business Center program significantly just in the last several years. And then we have our network of Community Navigators. Each of these programs provides a direct benefit to small businesses because it allows that small business owner to go and sit down with a business coach and get guidance from people who talk to business owners every day and help them plan and manage the growth and sustainability of their business. 

And then the last piece I'll touch on in terms of an overview is our work in the federal contracting space. So we're using the power of the federal spend to really help small businesses survive and to grow and to prosper and in fact to thrive. Last year, the federal government surpassed its contracting goal for small, disadvantaged businesses really a year ahead of schedule. And that was an ambitious goal that the president tripled the goal from where it had been and has us moving towards a new goal of 15% by 2025. 

So we already made the 11% one year earlier. More broadly, we've awarded 27% of the federal spend, or $154 billion in federal contracts to small businesses. And that's up $8 billion from the year before. It's nine years in a row that we've achieved our 23% small business contracting goal and exceeded it in the most recent years very significantly. 

And so we continue to push in that area because contracting is a big market. It's a big growth market opportunity for firms who are interested in having contracts with the federal government. Our contracts are up $50 billion over the last year. So we look forward to working with any of the folks who are on this call because we're very much interested in bringing more business owners, more small business owners into our supplier base. 

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Erin Rodliff joins the video call. 

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And I think, Joan, I will turn it back to you, and I guess actually to Erin. 

ERIN RODLIFF: Thanks, Antonio. I appreciate it. And thank you, Joan, for having me on today. Always excited to have the opportunity to talk about small businesses, given my role within Travelers, and really just wanted to take the opportunity to really talk through the current environment and how business owners can be thinking about what the right steps are to protect their business in this uncertainty. 

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Slide, A Small Business Playbook for Leading Through Uncertainty. May 3, 2023. Travelers. New slide, Leading Through Uncertainty. Managing a Complex Environment. Economic trends and environmental risks demand a thoughtful approach from small business leaders. Three textboxes, each containing a title and list. Box 1, Macro-Economic Trends. Inflation, Talent, Increasing Volatility. Box 2, Small Business Risks. Liability Risk Management, Workplace Injuries. Box 3, Risk Mitigation Focus. Proactive Risk Control, Cyber Risk. 

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So if we move ahead, definitely a complex and uncertain time right now. The current economic trends and broad environmental risks really demand a thoughtful approach from small business leaders. So I'm going to take a few minutes just to set the stage for the current economic environment, highlight a few of the risks that small businesses face within this environment, and then give some examples of how businesses’ owners can mitigate some of that risk. 

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Slide, Leading Through Uncertainty. Macro-Economic Trends. Three textboxes, each consisting of a title and a paragraph of text. Box 1, Inflation. While inflation continues to moderate in aggregate, the price of services rather than goods is driving the elevated levels. As input costs continue to moderate, small businesses should see price pressures decline, arrow, service prices fueled by higher wages is now the watch area and inflationary pressure still prevalent. Box 2, Talent. The labor market continues to ease with labor supply increasing and demand slowly falling. Attracting new talent should be easier in the upcoming months, arrow, employees might be more likely to switch industries, have less experience and require more training. Box 3, Increasing Volatility. Borrowing for small businesses not only became more expensive, but harder to obtain over the last year. As bankruptcies in the U.S. rise, arrow, business owners should focus on financial stability, risk protection and mitigation. 

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As we move forward, there are a lot of moving pieces and uncertainty, really, in the economy right now that impact small business owners, from managing cash flow to supply chain issues and really pretty much everything in between. We'd be here all day if we went deep into all of those, so I tried to boil it down to three key themes. 

First off, inflation. So after a year of significant inflationary pressure, we're starting to see some positive news that inflation is moderating in aggregate. However, when you start to peel back the numbers underneath, there's a pretty big shift towards service inflation. So while the CPI on core goods has moderated significantly in the first quarter, the inflation rate on core services almost doubled. Service prices being fueled by higher wages is now the bigger watch area. So while small businesses should see overall price pressure decline, inflation risk and the uncertainty around it is certainly still prevalent. 

The second piece is talent. So the labor market has definitely been on quite the ride over the last several years. But there are a lot of positive signs that labor supply is increasing, demand is slowly starting to fall. So attracting new talent should be easier in the coming months as that labor market eases. In fact, we saw prime age workers, so that's ages 25 to 54, return to their pre-pandemic highs for labor force participation, which is good news for companies out there still looking to hire. 

However, we have seen a shift within industries as the employment growth we've seen so far in '23 remains concentrated in a few sectors. Employees switching industries and then generally lower tenured, lower experienced workforce will require a lot more focus and training from business owners. And the third piece is increasing volatility. So the reality is we all live in an increasingly volatile world where not only is the economy driving tremendous uncertainty, but the landscape of risk is changing. 

For small businesses, managing cash flow is a huge challenge as borrowing has become much more expensive and loans harder to obtain. We see a big indicator of this in bankruptcy stats. In the first quarter of 2023, bankruptcies in the US rose to the highest level since 2010. And this was mainly driven by small, private companies who are much more likely to be impacted by tighter lending standards and higher inflation. So financial stability in addition to risk protection and mitigation needs to be at the top of mind for business owners. 

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Slide, Leading Through Uncertainty. Risk Management Challenges. A textbox. Title, Overview. Text, Generally, small business owners slash staff are not as knowledgeable about what to do when an accident occurs. In addition, small scale operations normally don't have dedicated resources like risk managers. A graphic comparing Mid-Sized Business to Small Business on three metrics, with bars representing the businesses. The small business shows higher risk in all three areas. Text, Liability Loss Reported After 3 Days, 27% higher. Liability Attorney Representation, 44% higher. Liability Loss Severity, 38% higher. A textbox. Text, Lack of timely reporting and early accident actions by small business owners can influence unnecessary attorney representation. Losses with attorneys take (at least) 50% longer to resolve and are 3 to 8 times more expensive. 

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So if we move ahead and we talk about inflation, you'll often hear the insurance industry use the phrase "social inflation" to refer to the impact of really the increasing litigiousness of society and the rise in jury verdicts on the cost of liability insurance claims. It's a pretty common misconception that this impacts only larger corporations. In fact, we see that small businesses are at higher risk. They don't have the same resources, like dedicated risk managers that larger companies have, and this comes through in the claim data that we see within Travelers. 

So if you look at that, you can see that small businesses experience significantly higher claim reporting delays, attorney representation and claim severity on liability losses. So we found that timely reporting is really the key to minimizing unnecessary attorney representation and managing that overall loss severity for a business. Claims with attorney involvement take at least 50% longer to resolve and are three to eight times more expensive. 

Reporting a claim early is the number one thing that you can do as a business owner to mitigate damage and disruption to your business. Most insurance companies, including Travelers, really provide multiple options for reporting a claim to make it as seamless and easy as possible. So you can call your insurance carrier directly, you can report online or through email, and you can always report your claim directly through your agent. 

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Slide, Leading Through Uncertainty. Workplace Injuries. A textbox. Title, Overview. Text, A lowered tenured workforce is more likely to be injured on the job. 42% of small business W.C. claims are from first-year employees. Of the most common causes of injury, motor vehicle accidents have the highest average cost per claim. Two infographics. Infographic 1, Title, Travelers. 2023 Injury Impact Report. Employee Injury Trends in Small Business. Average number of days small business employees missed due to workplace injuries: 79. Infographic 2, Top five most common causes of injury across all small business workers. 29%, Slips, trips and falls. 19%, Overexertion. 14%, Struck by an object. 9%, Cuts and punctures. 5%, Motor vehicle accidents. 

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Another risk to be mindful of is workplace injuries. So we talked about labor supply coming back to pre-pandemic levels and job openings being filled. And with that, many businesses are finding themselves with a much less experienced and lower tenured workforce. And that can lead to higher injury rates. 

42% of small business workers comp claims are from first-year employees. In our Injury Impact Report, we estimate that the average number of days an employee misses due to a workplace injury is 79. That's a ton of lost productivity for your business. 

And the common causes of injury that we show here, including slips, trips and falls and overexertion, can really happen across all industries, even those that don't seem that hazardous. So it's super important to invest in employee training, including safety training, and to proactively manage employee safety. Keep a clean workspace, follow ergonomic guidelines and implement safety practices that are specific to your industry. 

So I know that sounds like a lot, and I'm talking to a bunch of business owners and not safety experts. But if we move ahead, there are tools available to help. 

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Slide, Leading Through Uncertainty. Proactive Risk Control. A textbox. Title, Overview. Text, No matter what industry you are in, your company faces risk every day. That's why it's important to identify and reduce those risks. Beyond managing claim costs, effective risk control can help small companies prepare and recover faster after an unexpected event. Managing the total cost of risk creates a competitive advantage, helping you protect and grow your business. Three pictures of people in work environments. Title, Risk Control Services. Text, Education and Training. Risk Management Solutions. Industrial Hygiene. 

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Effective risk control can be an integral part in helping a small business reduce their risk and prepare for and recover faster after an event. You don't need to be a risk management expert, trust me. There are tons of online tools and resources out there. 

So a few to highlight here. There's a small business portal that you can access out on travelers.com, for example, that offers a variety of material, including a small business 101 that can help you to determine your business insurance coverage needs so that you have the appropriate coverage in place if an event does happen. You can also find insights and expertise with valuable guidance covering topics from office ergonomics to protecting your company's data. So this is all publicly available. 

The other option is to leverage your insurance company. So for example, Travelers offers risk control on-demand services, which provides virtual consulting to all of our policyholders, regardless of size. You have access to our specialists that can help problem-solve for a variety of risk exposures, including fleet safety, slip, trip and fall avoidance, industrial hygiene, and business continuity planning. 

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Slide, Leading Through Uncertainty. Cyber Insurance Focus. A textbox. Title, Overview. Text, It takes only one cyberattack or data security breach to impair your company's financial results, or even potentially put you out of business. Just one stolen laptop, one resourceful hacker, one virus or even lost paper records can cause data breaches and impact the privacy of the data your organization stores. Finding and remedying a breach can be complex and expensive. An infographic. Text, Cyber insurance coverage can provide valuable services, both in managing cyber risk proactively and responding to a cyber breach. Asterisk. Travelers Cyber Risk Policy Holder Services. Travelers e Risk Hub. Cyber coaches. Pre-Breach Services by Symantec. Post-Breach coverage. 

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If we move ahead, one of the biggest modern-day risks, cyber, is an area that continues to evolve and pose significant threat to businesses across all sizes and industries. In fact, about 10 minutes before I jumped on this call, I saw an update that Travelers sent out just today that surveyed business owners and found that, despite all of the risks and uncertainty out there, from inflation to labor supply to supply chain issues, cyber-risk was ranked as the number one concern for businesses. And cyber insurance is a key tool in providing coverage in the event of a cyber breach, but really more importantly, providing valuable services that can help you manage your risk proactively and mitigate potential losses.

So, for example, here with a cyber-risk policy, you would have access to a variety of tools, including an eRisk Hub, which is a web-based portal that has information and technical resources that can help you in the prevention of network, cyber and privacy events. We have cyber coaches, so a variety of coaches available, including Symantec security professionals that can help address general cybersecurity questions and help strengthen your organization's security, as well as additional pre-breach services, including a cyber resilience readiness assessment, professional consultation and training videos that you can leverage with your employees. 

So whether it's protecting against cyberattacks, workplace injuries or damage to your property, really the best place to start is with your insurance agent, who can ensure you have all the right coverages for your business, help you navigate the resources out there to proactively mitigate that risk and protect your overall financial stability. So with that, I'll hand it back to Joan. 

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The slideshow disappears. The video call with Joan, Erin, and Antonio reappears. 

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JOAN WOODWARD: OK, terrific. Thanks so much to both of you. Lots of good information there. And we're going to take our audience questions. So put them in the chat. I'm sorry, put them in the Q&A. But first, we always ask to the audience a few questions, so that's what we're going to do right now. 

We have two audience polling questions, and please join us in answering them. To get us a better self about you, the audience, which small business sector are you from, or which sector are your small business clients typically from? So we want to get a sense of the different industries so we can speak more-- instead of just generally, speak more to the industries that are actually on the line with us today.

So it's looking like we have a lot of construction small business owners on the line, which is really terrific. Construction, we have manufacturing, a little hospitality, some retail and real estate. So this is really great. I appreciate your-- everyone's participating. I'm going to scroll down here just to make sure I didn't miss anything on the bottom. Financial services, of course, because we're in insurance. So excellent, excellent diverse audience. That's great.

1. Now we're going to move on to the second question, second polling question before we get back to our panelists. Have you or your clients engaged with the United States Small Business Administration district offices or any of their resource partners? Have you called the SBA, been on their website, got a SBA loan maybe from one of their lenders?

I believe the SBA doesn't directly lend, but they have designated lenders out in the country that directly lend to you. So have you engaged them or not? And maybe this is a real opportunity, Antonio, for us to really talk about why someone would call you in the first place.

So over half of our audience have not. So this is a real moment I think we can help you out here. Antonio, what do you make of this? We have several thousand small business owners signed up for our webinar today. And more than half haven't called you guys. Is this concerning?

ANTONIO DOSS: Actually, it's not.

JOAN WOODWARD: OK.

ANTONIO DOSS: So the Small Business Administration, government in general, we're here to fill the gap where private industry offers or provides something that matches what the need is of the marketplace. So if the market is being served by private industry and it's getting what it needs, we're generally pretty good with that.

When the market has a need that is not sufficiently being carried forward by industry, then that's typically where government comes in. And so for the Small Business Administration in a lot of cases, we are there to support businesses when they're dealing with a challenging situation. And again, the whole environment of COVID and all the restaurants and retail organizations that we helped support and keep in business was super vital during that time.

So we're a bit more of a niche player in terms of the overall impact that we have in terms of the percentage of businesses that we reach. But we reach them when they need us and vice versa. And so it's healthy to see the information. And good to see that there's a-- quite a number of construction-related firms on board. So good information on both polls.

JOAN WOODWARD: OK, great. So we're going to talk a little bit later about disaster-- like you can get an SBA loan for a disaster, a federally designated disaster. And that's kind of a different ball of wax. I want to talk first about what is the mood of the small business owners that you're working with today. Is it regionally? Is it better in certain regions or not in the United States?

What are they concerned about in your view? But are they generally optimistic? We found, as you just said, during COVID, during the pandemic, clearly a lot of businesses went out of business. But I believe it was also one of the largest periods of time where we actually created a lot of new small businesses, as you just talked about during the last two years, but even before that. So what is the mood today of small business?

ANTONIO DOSS: Well, I think in general, first, maybe one of the most important things, small business owners and small businesses in general, they're a very resilient group. The path to business ownership, the path to getting-- starting and pursuing that business, to moving to the point where you start making money off of the business, not just sales but profits as well. It's one that has a number of steps to it. And so business owners have found a way to work through many challenging situations, and they've learned to manage and adapt.

And we saw that, particularly if you look at the retail and restaurants, that environment. We've seen that there's a great rebound that's happening there, not in any one particular region, but I think really across the country. More and more of the restaurants that survived through that period of COVID have really started to do pretty well now.

So we see that as a good barometer in general. But other industries had to make adjustments, too. If there's people on here in construction, if you're-- in those last couple years, if you were doing home construction, now all of a sudden, you're remodeling or whatever, your team had to come in with a mask on or whatever to facilitate. Some people didn't want anybody coming in their home. They decided they'd wait for a while. So there were some certain challenges that has definitely happened.

We see, when I think now it's a little bit more back into the common retail and restaurant space, a lot of those restaurants adopted new space or expanded space that was before just a space where people could park, whether it was on the street or in a parking lot. And all of a sudden tents or other structures were established with lighting and heating and things. And so they found a way to make sure that they could still entertain clients and provide the service that people really wanted to be able to have.

I think when I look back to that spring period of 2020 when COVID hit and there was so much uncertainty, none of us really knew what this thing was going to do and how it was going to play out. But to see that now we've got a record 12 million people beginning the process of establishing a business, it's a phenomenal indication of the resolve, also, of the American people and the entrepreneurial spirit that exists because that was a tough stretch. And usually after a tough stretch, people could be a little bit hesitant to move in, but we're seeing just the opposite taking place. So I think that is definitely one of the positives that's an indicator of the mood of the entrepreneurs in this country.

JOAN WOODWARD: That is terrific to hear. It really is. So Erin, I want to go to you because I want to talk about risk management. And how do you typically see economic changes impacting risk and risk management for small businesses? What are the trends you're seeing in your business?

ERIN RODLIFF: Yeah, I think that's a great question, Joan. And it really depends on the economic environment. So if I go back to some of the high-level trends that I shared at the beginning, I really think about that high inflationary environment. And so that has a lot of impact on small businesses in terms of just even managing their costs, but also the cost of insurance.

And so we see that insurance premiums are tied to inflation, so they can cover the cost of claims. Increasing payroll, sales, building values will also translate into an increase in premiums. So you need to make sure you're budgeting appropriately for that.

But I really think even more broadly, with all the economic and financial risks and trends that a small business has to be concerned about within that current environment, it really exacerbates the potential impact of other risks. And so if you're struggling to manage that day-to-day cash flow or your lending has dried up, any unexpected event that puts you at higher risk is really going to be exacerbated. And so the importance of making sure that you have that adequate insurance coverage in place to protect your business as well as mitigating those risks as best that you can upfront.

JOAN WOODWARD: OK. Let's really talk about some insurance areas now. So insurance for small business, what's been, in your mind, the biggest developments maybe over the last few years? Has products changed and evolved maybe post-COVID? Is there something that you're seeing as a trend?

ERIN RODLIFF: Yeah, I think the biggest thing for me, when I step back and look at it-- and it's been a broad trend, really, across all industries-- is the technology advancement. And so if you think about how that's impacted the insurance space, especially for small businesses, insurance is such a data-heavy industry. So now instead of taking days to get a quote for a business insurance policy back from your agent, it can really take minutes. And so with the use of automated quoting technology, third-party data, sophisticated modeling techniques, you can get that coverage that you need underwritten quickly and at the right price for your individual business risk.

And from a product perspective, continuing to see the product evolve with what that emerging risk looks like. And so I think cyber is probably the biggest example of that, where we've seen just the threat level there continue to be at heightened levels and continue to evolve in terms of the ways that people are accessing data and getting into your business. And so the cyber coverages that have continued to be adapted, especially for small businesses within this environment, and the ability to get at that coverage in a seamless way through your agent has been one of the biggest things that we've seen.

JOAN WOODWARD: So let's kind of stay on that topic, because beyond the actual insurance policy, what is the value, then, of an insurance carrier in cyber? From kind of beginning till the end, is there a cyber assessment of a small business? Because each business can be very, very different in terms of what their vulnerabilities are. So are there risk control opportunities even for small businesses when they're thinking about cyber?

ERIN RODLIFF: Absolutely. And so some of those-- the screenshots I shared, when we think about when you do have a cyber insurance policy, typically that will come with access to those types of services. And so Travelers, for example, will provide you with access to that hub that you can sort of self-serve, and also give you that access to those coaches and those professionals that can help you do that assessment to understand where your biggest cyber-risks are, how you can implement safety controls and practices to really protect that. Simple things like multifactor authentication has been a big push over the last few years, really across all industries, to make sure that you're having that protection for your data and for your business's information.

JOAN WOODWARD: Good. Good. Antonio, back to you, because the Travelers Institute, we just hosted our 50th cyber education symposium, actually, at the New York Stock Exchange last month. And we've been really fortunate to partner with the SBA.

Our CEO was at the White House about a year ago with the head of the SBA, the administrator there, and President Joe Biden talking about cybersecurity and the business imperative for getting that right for our country. A lot of small businesses, though, are vendors. As we just talked about, you've had a great career in contracting, small business contracting with the federal government. What steps are you taking as the SBA, or as Department of Homeland Security and the CISA office, which is overseeing a critical infrastructure? What are you requiring of your small business owners to have in place with regard to cyber before they even get to contract with the federal government?

ANTONIO DOSS: Well, the cyber-- first is I just have to say, the cyber-risk is the preeminent risk that many of our businesses face right now. And so the Small Business Administration working with Homeland Security has done a lot in terms of education and support to small business to have better awareness of this. There are increasingly more requirements in our contracting areas, particularly where it's risk-- extra risk-sensitive for some of the work that's being done.

We're encouraging more and more of our firms to demonstrate that they have in place the proper tools and systems to safeguard against unwanted and really inappropriate intrusions into not only the small business, but potentially also into the federal government. So there is certainly a lot that is taking place on that.

Some of it is also just about good education, making sure that our business owners and-- as they work and develop with their companies they're trying to achieve-- that they're fully grasping the risk around cyber. Unfortunately, as devastating as the hit can be if you get caught on a cyber intrusion, too many businesses don't feel the urgency until after the hit.

And so now they're in recovery mode. So we're trying to constantly recommend good safeguarding of information and good tools to prevent or minimize, to the extent that one can mitigate the risk of some of these intrusions from happening.

JOAN WOODWARD: Got it. I'm going to take some audience questions. We're going to get the audience involved here early on in this hour. We've got a number of people asking, Antonio, please define what is the federal government's definition of a small business. Is it by employees? Is it by revenue? How do you define a small business?

ANTONIO DOSS: Yes. It's both and all of the above. So we actually have a process whereby we assess every NAICS code, North American Industry Classification System code. And we actually designate a either dollar level of revenue or employee level of what constitutes being small, or what we refer to as other than small.

Most of our codes, our NAICS codes, and industry classifications are based on revenues of a company. But it can vary pretty widely depending on the nature of the industry, the players in the industry and the factors that our team works and puts this review together establishes. So it's possible that a NAICS code in revenue could be as low as, say, $7 million is small. And we have some that are well over 30 million and are still considered small. The big thing we're trying to make sure is that there's no dominant player sitting in the middle of a small business category that has a super unfair advantage because of their size and competitive advantages that would otherwise block the participation of small businesses.

In general, 99-plus percent of all businesses are deemed small as a result of the way the country works and our data has shown us. So, and the same is true whether it's employee-based revenue. Often, 500 employees, which would sound like a huge operation if you're a law firm or you're a small construction company. But in some sectors, 500 employees is really not so small. And so we take that into consideration.

JOAN WOODWARD: OK. I want to talk a little bit about disaster loans because I know the SBA obviously does a lot of disaster loans when people need it the most. What does a small business need to understand about looking at the resources available to them before the disaster strikes?

So if I'm a small business owner listening on our call today, is there a place on your website that I can familiarize myself? We have hurricane season right upon us. And if you're living in a hurricane zone, you want to know what SBA resources should you be hit by an emergency. Where should people look for that?

ANTONIO DOSS: The easiest source is SBA, as in Small Business Administration, dot gov. We have a lot of information on our website around disaster preparedness and disaster recovery. But the preparedness part, which you've asked, is an astute question. What should I be doing today? What are some of the documentation that I need to have in place? What are some of the records I need to be able to make sure I can access?

So we list a whole series of different things that business owners can start to do in advance of a particular situation coming along. Some disasters, like I'm always afraid most of earthquakes because there's no weatherman that says earthquake alert next week. They just show up. So you have to think about what your particular potential disaster environment might be at some places.

Like right now, we've got the melting of the snow in California. And so we know we're going to see flooding. We've seen that in the upper Midwest as well. So there’s certain seasons where it picks up in different ways. And soon it will be, unfortunately, hurricane season again for a lot of the businesses that are located in and around the Gulf Coast in the lower southeast part of the country.

JOAN WOODWARD: Now Erin, I want to pull you in here because we have a lot of resources, obviously, for disaster prep for small business owners. And what are you seeing? What are some of the trends you're seeing? Are people really having that business continuity plan, the contingency plan written up and maybe not in the same building as your small business, maybe offsite? Talk about business continuity planning for small business and how critical that is as you insure them.

ERIN RODLIFF: Yeah, I think that's a big one, Joan, and I do think that we see that most small businesses really don't have a business continuity plan in place. And so one of the services that we do provide that you can leverage that on-demand risk control for is to help you put that plan into place.

And so if a disaster strikes, if there's a fire in your building, if there's a need for you to shut the doors of your current location, how do you manage through that? What are your backup options? How do you think about making sure that your employees are safe, you're minimizing that damage that might occur in the interim, and making sure that you can get your business open as quickly as possible? And so those are things that I don't expect small businesses to be experts in, but there are resources that you can leverage through your insurance company. Travelers has many of those that can help you pull together that plan.

JOAN WOODWARD: OK, terrific. So a little bit more on the agent side, because our insurance agents, obviously, on the call are our best business partners. And so understanding the different kinds of insurance one would need, if you're a small business, maybe a sole proprietor. Can you just walk us through, Erin, maybe just a couple of quick examples, if you're a small construction company and looking for that trusted advice from an agent?

ERIN RODLIFF: Yeah. And I think the most important thing is talk to your agent, right? So that's where we want you to go. We want you to have that coverage consultation. And so when we think about the traditional small business coverages, so most people will go to sort of a business owner’s policy.

So that's your traditional BOP. It combines property coverage. So if you own a property, or even if you don't own a property but you have contents that you're storing in a rented property, or even a contractor thinking about the equipment that you might have on hand, as well as that liability coverage. So making sure that you're protected if someone does file suit against you, or if there is a loss on your property.

So that tends to be the base coverage that most of our small businesses are looking for. And then from there, really need to answer the questions of, do you have employees? How many employees do you have? Do you need to buy workers compensation insurance? Do you have any commercial vehicles? And obviously that comes along with commercial auto.

And then some of the other coverage that I think business owners don't often think about, professional liability. And so are you in an industry where you need that coverage to protect you against any professional liability type losses or suits that might come up? And making sure that you're consulting with your agent to understand where those coverage gaps might be and closing them effectively.

And we often refer to the stat that we think about 22% of small businesses are completely underinsured. And so there are a lot of options out there today. You can contact a local agent. You can find agents online. There's a lot of services to make sure that you're appropriately covering yourself from a potential--  for potential losses.

JOAN WOODWARD: Yeah, that is unfortunate. We've heard that number out there before. OK, I'm going to take another question from the audience. This comes in from PropertyCasualty360.com, Patricia Harman. "What are some of the more common mistakes business leaders make during times of uncertainty?" So, Erin, you want to take that first?

ERIN RODLIFF: Yeah, sure. I think for me, the biggest mistake is being reactive. So when there's a lot going on, there's a lot of different risks to think about, there's a lot of uncertainty in the environment, it's very common for folks to just react as things get thrown at them. And I think the biggest thing coming from an insurance perspective and seeing the other side of it is how do you be proactive against protecting yourself against that risk.

And so one piece of it is making sure you have that insurance coverage and solving for those coverage gaps. But the other piece is where can you access and mitigate against risk that might be big for your company, and you want to make sure that you're able to effectively mitigate that. And so we find that many small businesses actually never reopen after experiencing a large or catastrophic loss.

And so another great example I saw recently was a small business who actually leveraged our risk control-- risk control consultants to review their warehouse and look at their sprinkler plans and actually advise and help them through an upgrade of those sprinklers. Given the nature of the products they were storing there and the fire risk, that was really top of mind for them. And so they were able to go through that whole upgrade, get those safety consultants in, and protect themselves against a potentially catastrophic fire exposure that most people really aren't thinking about, but was a big risk for that individual company.

JOAN WOODWARD: Do you want to add anything to that, Antonio?

ANTONIO DOSS: Well, I think the proactive wording that Erin used is really a great one. And a lot of it goes back to what was your plan in the first place as a business owner. A, did you have a plan? Was it well thought out?

Well, did you update it? Did you keep it current? And so, when chaos happens, if you know where you're trying to go anyway, you can adjust much easier. And you can figure out how to stay on that course.

But if you were sort of wishy-washy and you were many different things at many different times and not really consistently driving towards one particular approach, then a bump in the road can easily cause you to get spun off into some other direction, which is really not where you want to be at all. And you have less ability to get your footing. So it all starts to me with planning, effective planning, and having a strategy that's mindful of potential things that can happen. Whether it's disaster-related or competitor-related, there are always elements that are going to come into the life of the business that you have to be able to adjust and deal with.

JOAN WOODWARD: OK, thanks for that. Next question coming in from LexisNexis Risk Solutions, Malcolm Tsung. Do you-- this is for you, Erin. "Do you see any trends for the use of data to underwrite small businesses?"

ERIN RODLIFF: Yeah, definitely. That's a big part of when I talked about the technological advancements that we're seeing, especially within small business underwriting and quoting process, a huge lift from third-party data. And so, as we think about what we can either get or use to verify the information that typically your insurance agent would have to ask you for, we can access through these data sources.

And so, think about things like if we're underwriting a property risk and we can use aerial imagery to look at the condition of the building, to look at the roof, to look at those things doesn't require us to send a person out. So it's a much more efficient way of getting the information on that risk. I would say the other data source that I'm looking forward to-- I think there's some exciting developments coming in the next years to come is telematics.

So this is something that we talk a lot about. Personal insurance has taken off quite a bit in the insurance space. We see it in the large fleet sector in terms of using the safety devices there. But there's a whole host of data there that as we start to see that uptick within the small business insurance landscape there's a ton of data there that not only can help from a safety perspective in terms of vehicles out on the road, but also with business owners lowering their commercial insurance costs from an auto insurance perspective. So I think there's a huge lift there in the years to come.

JOAN WOODWARD: OK, terrific. Question for both of you coming in. "Do you have any tips for the newcomers out there to be a small business owner, how to adopt a entrepreneurial mindset?" Because a lot of us get caught up in process, the process of this and just the demands of your daily getting things done, getting it out the door. But how do you keep that entrepreneurial kind of mindset?

Maybe you, Antonio, first. You've dealt with a lot of federal government contractors, right? What are you seeing are the most successful ones and how they keep so nimble, shall we say?

ANTONIO DOSS: Yeah, that's a fantastic question, and I want to say a couple things about it. So one, when you're looking at an entrepreneurial mindset, first, it's not something to just walk into casually. You've got to kind of want to be an entrepreneur to take that risk and go into it with a good conscious mindset about what you're doing.

Planning, as I mentioned before, is very, very important. But one of the things I think is most important is continually educating yourself. Most people who are CEOs of a small business today or founders of a small business never had that title before. They were something else. Maybe it was in IT. Maybe it was in construction.

They may be technically as strong as anybody you can find, but now they're in a position where they're directing the operations of an organization. They've got staffing things to think about, they've got business financing things. They've got the financial-- understanding your business from a financial perspective. Maybe out of all the surprises that came out of COVID for us at SBA was the level of knowledge that didn't exist within too many small business owners about their financials and how their financials say what is happening with their company and how to manage and guide themselves.

So that's one. The other that I would say, and this kind of relates also to the education piece, we do a number of different training programs directly and through our resource partners, many of which are cohort-based models where you've got maybe 20 business owners who go through the same program over a series of months. That type of education is one of the best things that I've seen.

We have a program called Thrive that is one of those models that we use right now. And what it allows people to do is be in a room with people who are like themselves. They're trying to figure out and work their way through, and often it becomes small group connections that happen even within that smaller 20-person group.

And they-- what I've seen, they stay together. They connect. So when you're thinking and talking about things that are in your mind, you're thinking and talking about things that are related to your business. And so are the people that you're engaged with a lot. So it's kind of iron sharpening iron, and reinforcing things, and being a support group. Lots of different values that come from that that is really, really helpful to businesses.

JOAN WOODWARD: OK. Erin, did you want to comment on that?

ERIN RODLIFF: Yeah, I think the only thing I'd add there is as I think about small business owners and the entrepreneurial mindset-- you start a business, you start to grow it. Now all of a sudden, you're an accountant, you're a boss, you're a risk manager. You're all of these things.

And my advice would be leverage those tools that are available. Leverage all the stuff that Antonio talked about with what the SBA can provide, what insurance can provide, what all of these things can provide to help you manage that financial risk and all those other aspects of your job as now a business owner so that you can focus on the business and what inspires you day to day. Because I know you guys don't want to be thinking about mitigating liability losses. That's just not going to be top of mind for any business owner, really.

JOAN WOODWARD: OK, good. Another question coming in about interest rates and inflation, and just the cost of doing business now going up, with both of those things layering on top the wage gains, with inflation obviously causing wage gains, and just kind of the “great resignation,” so thinking about employees. We're here at RIMS in Atlanta, as I said, talking about workplace safety and workplace health, mental health. Thinking about employees at a time when interest rates are up, inflation are up. People have anxiety. From kind of that perspective, did you have any tips or ideas for our questioner here?

ANTONIO DOSS: Is that one directed to me? I'm sorry.

JOAN WOODWARD: Sure, we'll go with you first. Yeah.

ANTONIO DOSS: So we're dealing with real issues in terms of unexpected cost changes over the last couple years. And we see this is something that affects small businesses, affects large businesses as well. Even in the financial service industry, some of the challenges in the banking sector were related to risk management about pricing changes and interest rates.

So a lot of that, again, goes back to the plan that a business owner has. What are they doing to make sure that they've got the proper, I'll call it nest egg, of backup? Some of that is in the form of credit because sometimes you need an additional credit line because maybe a revenue stream is slower paying than it should have been because there's other things affecting that that are out of your control.

We've got companies-- we met with a company that was doing construction work. And they got a nice contract. But the particular piece of equipment that they needed for that contract, instead of being available in 30 to 45 days, was going to be available in a year. And so then the question becomes, well, do I buy this piece of equipment now, knowing that the price is pretty high and I can't really get to use it for a year and I'm supposed to be using it in the next couple months? Or do I try to wait it later to get to that piece of equipment? Maybe the price changes.

These are real challenges, and the answers are not obvious in most cases because we haven't arrived yet to the future to know how the pricing may have changed. So it requires a business owner to think about that and to try to build in savings wherever they can. So it may mean maybe don't take quite as big of a salary that year or a bonus, or you do some other adjustments in order to make sure you've got a tight financial bill.

JOAN WOODWARD: Erin, did you have a thought on that one?

ERIN RODLIFF: Yeah, I think, Joan, I might add there-- because I think you mentioned employees and how that comes into play. And so I think the biggest thing, especially with what we've experienced in the labor market over the last few years, is it's so much easier to retain the employees that you have than to have to go out and hire new ones. So the more that you can invest in training, development, engagement, making sure that your employees are getting what they need within that environment and the services that you can provide them versus having the cost of going out and having to replace. And I think that's the biggest thing that we've seen with employee turnover is making sure that you're investing the right amount of time upfront in that employee engagement and training.

JOAN WOODWARD: OK, terrific. Well, I have to close the program. The hour really just flew by, and it was terrific having you both join me today.

It is National Small Business Week, and we're just so pleased to have such senior people on our show today. So, Antonio, in particular to you, thank you so much for first for government service over many, many years and helping all our small business owners get those government contracts, which are critical to their lifeblood. So, thank you so much. And Erin--

ANTONIO DOSS: Thank you.

JOAN WOODWARD: --thank you for your expertise.

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Slide, Wednesdays with Woodward (registered trademark) Webinar Series. Register: travelersinstitute.org. Upcoming Programs: Webinars. May 17 - Previewing the 2023 Travelers Championship - We're Taking It to the Next Level. May 24 - The Rapid Rise of Litigation Costs. June 7 - The How and Why of D&I with Travelers' Chief of Diversity & Inclusion Officer. In-Person Programs. May 23 - Cyber: Prepare, Prevent, Mitigate, Restore (Charlotte).

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I want to talk about a few things now with our folks on the line. We have a terrific lineup coming up in the next few weeks.

On March 17, join me. We're going to talk about the Travelers Championship, which is our premier PGA Tour golf tournament. And it was elevated this year, as you may or may not know. So golf has changed in the last couple of years. And we are an elevated PGA Tour event. And so we'll have most of the top 20 players in the world join us here in Hartford, Connecticut. So tune in. We're going to get a behind-the-scenes sneak peek at what it is-- looks like to put on a tournament like that.

Then on May 24, we're going back to insurance, and we're going to look at the rapid rising cost of litigation. We just talked about social inflation, litigation, and is just-- it's really interesting to see what we've been seeing in our claims data and share that information with you.

And then on June 7, we're going to sit down with our Travelers Chief Diversity and Inclusion Officer. Dr. Lauren Young will join us to talk about why organizations are leading the change for diversity and inclusion initiatives, and importantly, how they're going to help-- how my conversation with her could potentially help you in your business.

So, one last note. If you're in Charlotte, North Carolina, please join us for a live, in-person complimentary luncheon. We're going to be down there on May 23 talking about cybersecurity threats with a lot of government speakers as well.

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Slide, Wednesdays with Woodward (registered trademark) Webinar Series. Watch Replays: travelersinstitute.org. Connect. LinkedIn. Joan Kois Woodward. Take Our Survey: Link in chat. #WednesdayswithWoodward.

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So, in our survey-- please take our survey. Let us know who else you want to see on our shows and what topics. We're thrilled that you join us every week. We just really appreciate all of the engagement. So have a great afternoon, folks, and we'll see you on May 17.

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