What is Business Interruption?
Posted: December 27, 2024 at 3:00 pm
Business Interruption Insurance is designed to protect businesses against the financial impact of unexpected events that disrupt operations. Here’s a closer look at what this level of cover can include:
What It Can Cover:
- Loss of Income: Replaces lost revenue during the period when your business is unable to operate.
- Ongoing Expenses: Covers expenses that continue even if your business is temporarily closed, such as rent and utilities.
- Temporary Relocation: Expenses associated with moving to and operating from a temporary location.
- Staff Wages: Ensures you can continue to pay employees during the interruption.
- Recovery Expenses: Costs of getting your business back up and running, like advertising to let customers know you’re back in business.
*The above is subject to policy terms, conditions and limitations and is for example purposes only, self employed artists would not be covered as standard.
Common Causes For A Business Interruption Claim At A Tattoo Studio:
- Fire: Damage from fires that prevent normal business operations.
- Natural Disasters: Floods, earthquakes, storms, etc.
- Equipment Breakdown: Failure of critical machinery or technology.
- Supply Chain Disruption: Issues with suppliers that halt your operations.
It’s essentially a financial safety net, ensuring that even in challenging times, your Tattoo and Piercing business has the support it needs to recover and continue.
If you’re considering this for a tattoo studio, it could be very useful, especially in covering the time you might need to rebuild and get back on your feet after an unexpected event.
How do I know if a policy has Business Interruption?
Our team are always happy to talk through your company needs (and current levels of cover for existing policyholders), to ensure that you have the correct insurance for you and your business.
How is Business Interruption Calculated? AKA – “Gross Profit”
WHAT IS GROSS PROFIT?
Gross Profit is a key financial metric that shows a company’s revenue after deducting the cost of goods sold (COGS). It essentially measures how efficiently a company produces and sells its products. Here’s a breakdown:
Calculation:
Gross Profit=Net Sales−Cost of Goods Sold (COGS)- {Gross Profit} = {Net Sales} – {Cost of Goods Sold (COGS)}
- Net Sales: Total revenue from goods sold or services provided, minus returns, allowances, and discounts.
- COGS: Direct costs attributable to the production of the goods sold by a company. This includes the cost of materials and labor directly used to create the product.
Importance:
- Profitability Analysis: Indicates how well a company is managing its production costs relative to its sales.
- Pricing Strategies: Helps businesses determine if their pricing strategies are effective or need adjustment.
- Operational Efficiency: A higher gross profit suggests that the company is efficient in its production and sales processes.
Example:
If a tattoo studio has net sales of £50,000 and the COGS is £20,000, the gross profit would be:
£50,000−£20,000=£30,000£50,000 – £20,000 = £30,000
This means the studio has £30,000 available to cover other expenses, such as rent, utilities, and salaries.
IMPORTANT – It is your responsibility to ensure that the levels of cover suit your company needs in the event of a claim, taking the time to review your gross profit is imperative. Here at Tattoo Insure, we are happy to work with you to enable you build a more bespoke level of cover for your business if required.
