If you’re a business professional, then you know that one of the most inescapable aspects of running a business is the risks you’ll face. That’s not saying that you’ll face these risks and succumb to them but you definitely will face them at some point in your entrepreneurial career.
Because businesses face all kinds of risks,
they have the potential to lose a significant amount of profits or they can
even go bankrupt if a business isn’t protected from a certain type of risk. The
larger companies typically have a risk management team or department that
handles the big risks they face.
With small businesses, they definitely face
some of the same risks as the big businesses but smaller businesses are more at
risk because they don’t have as many resources or even the know-how like bigger
businesses and because of that, small businesses need to make bigger efforts to
lessen their likelihood of falling victim to these risks by employing proper
protection strategies.
Take a look at some of the biggest risks that
all start-up businesses will face.
Risk
1: Strategic Risk
As a brand new start-up business, determining
which first steps to take can be a little difficult. There are “tips” on how to
formulate a strategy for small businesses but all businesses are different and
certainly come with their own set of challenges… in knowing that, it’s pretty
safe to say that there isn’t a formalized process in how a business owner
should make decisions for their business. As a business owner, you just have to
make those decisions as they come to you based on the needs of your business.
The Solution
To properly prepare for this risk, all it
takes is a little bit of research and planning. In your research, do it based
on the current needs of the industry your business is in, what your competitors
are doing, and also the experience you have in the field… can’t count yourself
out!
Risk 2: Security Risk
Security risk might be the worst of all the risks because it not only threatens the security of personal information of your customers or clients but it also heightens your reputational, financial, and interruption risks as well. How does it happen?
It typically happens from some type of failure or malfunction within the IT systems. Business owners also fail to update their security software or simply don’t have any at all, and that’s a big no-no!
The Solution
First and foremost, with small businesses,
especially e-commerce stores, you need to have a security risk management plan
in place in the event that something like this happens. Hackers are getting
smarter and more skilled and are able to get into computer systems and steal
unauthorized sensitive information. That reason alone is why cybersecurity is
so important. As a business owner, you need to invest the time, effort, and
money into making your cybersecurity stronger with risk assessment.
Risk 3: Financial Risk
Although security risk is a pretty big risk,
financial risk is actually the biggest risk that small business owners face
every day. Just think about it… most small business owners have poured their
life savings into their business or taken on a lot of debt to fund their
business, and in doing that, failure is not an option in their minds and eyes.
The Solution
Planning and preparation are key here. Be sure
to weigh out all your financial options. Sometimes family is willing to help
you in the beginning, small business loans, and crowdfunding might also be an
option. The main thing is to know that you can multiple financial options.
Risk 4: Reputational Risk
Oddly enough, with everyone being online
shoppers these days, it’s hard to believe that reputational risk is the most
overlooked risk of them all. According to Statista,
1.92 billion people shop online yet
reputational risk is the least of small business owners’ concerns… Well, it
might be the least of their concerns but it’s certainly a risk that could be
very damaging to your business.
The Solution
Don’t be afraid of your customers or clients;
ask them for feedback on the products or services they’ve received. This can be
hard for some business owners because they only want the positive feedback and
not the negative feedback. The reality of it all is that you should want both
positive and negative feedback as a way to know what’s doing well in your
business and then be able to recognize the areas of improvement.
What You Can Do
From a financial and compliance point of view,
the best way to protect you and your business is to invest in general liability
insurance. Whether your business is big or small, protection is protection and
without it, you could lose your business.
Not only that, depending on where you live,
some states actually require you to have some form of business insurance but
for general protection of your business, you need
to invest in general liability insurance.
Now, if you have a business that requires
additional policies, it will be in you and your business’ best interest to
obtain that. It’s not a way to get more money out of you, it really is solely
is to protect your business. Wouldn’t you rather pay for protection than to
clean out your bank account to pay for bodily injury? It’s totally worth the
peace of mind.
