Kasalis: Sharp Focus on Protecting Value
In September of 2014, we introduced you to a company called...
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Tropical Products, Inc. (TPI) was launched in 1992 in Beverly, as a producer of pet shampoos. Since then, founder and CEO Ed Berman has grown his branded and private-label lines to include everything from people shampoos and feminine hygiene products, to shower gels, hand sanitizers, coffee pot cleaners, disinfectants, hair dyes, and more. In addition, Tropical Products has expanded from three employees—“Me, myself, and I,” jokes Berman—to more than 50, all housed in a facility that eclipses 50,000 square feet, and enjoys revenues well into eight figures. “Our customers include Wal-Mart, Target, Whole Foods, and PetSmart, among others. We manufacture for a wide range of both national and store brands. If it’s safe and goes in a bottle, we’re there,” he notes.
With growth comes a greater need to protect any business, and Tropical Products is no exception. In fact, the company experienced 40 percent growth in 2014 (its typical rate is 15 to 20 percent annually), which necessitated the recent installation of upgraded servers and reinforced security systems to protect its networks and data. On the manufacturing side, the company has several redundancies built into its production, including replicated bottling lines and duplicate pieces of equipment. “We don’t experience a lot of downtime,” says Berman.
The business may have been protected in a lot of ways, but you can’t always predict where issues will come from. This past January, while New England was getting pelted with snow, Tropical Products took a direct hit, experiencing the collapse of a 20 by 40-foot section of the roof over its storage area. While the cave-in didn’t injure any of the manufacturer’s employees or damage equipment—it took place on a Sunday night—it still meant the loss of two weeks’ production until that section could be repaired.
“Fortunately, our policy includes business interruption insurance, which meant that we could fill the revenue gap until the repairs were done,” says Berman. “Some customers were upset, so we moved them to the head of the production line as soon as we were up and running. For the two weeks that we were down, we also paid our employees. We could have told them to sign up for unemployment for those two weeks, but they wouldn’t have collected their first paycheck for six weeks. These are hourly workers, at $10 to $12 per hour, and they need every hour they can get—we can’t afford to lose these people. The good news: We shouldn’t experience any loss to the bottom line for the year.”
But, he adds, the collapse was a much-needed wake-up call. Based on Tropical Products’ recent growth, had the damage been more extensive, the claim might have exceeded its coverage.
“We’d reviewed the policy two years ago, but hadn’t accounted for our more recent growth,” he says. “We got lucky, but we’re planning another 5,000- to 6,000-square-foot expansion to our storage area and I’d hate to get stuck in that position again.”
Berman had switched agencies a few years ago, from a two-person office in Beverly to Salem Five, because he wanted better service and greater access to a wider range of providers. “As we started to grow, every year it would come down to the wire for getting product liability insurance,” he states. “We didn’t know until that day whether the policy was going to expire or be renewed. Because this agency was so small, they didn’t have access to any of the big insurance companies.” The coverage Tropical Products has includes building, liability insurance, contents, equipment, and business interruption. “And we actually ended up saving about $6,000 a year for a much more comprehensive program,” he states.
But, Berman learned, having the right agency in place is only half the battle. The collapse taught him that he needs to assess his coverage annually. He now has his accountant review his coverage and plans to go through an annual audit with Salem Five.
“We really did get lucky this time around,” asserts Berman. “Along with the coverage we had, Salem Five and senior vice president of commercial lending Paul Passeri stayed in close contact to make sure the work was progressing, and the carrier they helped us find, Hanover Insurance, was treating us well. To me, it feels like our business—its growth and protection—really matters to Salem Five.”
To learn more about the benefits of an annual insurance assessment, read “Insurance: Not Just ‘Set It and Forget It.'”
Keep Your Business Covered
Averting potential disaster can be a relief. But preparing for it can ensure that it doesn’t sideline your business. Ed Berman, founder and CEO of Tropical Products, narrowly escaped Mother Nature’s wrath—brought on by a snow-related roof collapse—earlier this year. “We learned that we needed to be on top of our insurance coverage,” he says. We hadn’t accounted for growth, and it nearly cost us.” Now, he works to audit coverage every year with Salem Five Insurance. “We don’t plan to stop growing, so we need to be prepared for the unexpected.”