You may have started your business, or you are thinking of starting that business that you have always wanted to start. But you are thinking, what is the business risk involved? And can my business be able to handle it? Well enough to be able to survive where some businesses have not in the past? Well, today I discuss the business risks that exist. And how to make sure that your business actually lives to fight another day.
If there is one business risk we can all agree on is a recession, after all, the main reason for a business is for the betterment of your economic activity. This pandemic has made us all very aware of this particular business risk and it is one that has bankrupted many businesses. So what do you do if the economic activity goes down? Have insurance taken out on key people just in case of anything, they can be able to stay on for as long as possible.
Have procedures set out in case a recession happens, they can be carried out as swiftly and as smoothly as possible. For example; the immediate cease of any further recruitment of employees. Review of suppliers, what are the credit terms you have with them. Are they able to handle the supply on credit all through the recession?
Another thing that is vicious in the business world and a huge business risk is competition. There will always be a product that is better than yours at one point. Or a service that is better than yours at one point. So what can you do to make sure that you stay on top despite the competition? You need to invest in market analysis.
Invest in social media monitoring, invest in marketing strategies monitoring, check which campaigns are doing better than the rest. Make sure you are running the campaigns individually in the beginning. As you keep tweaking to see which strategy works the best. Then you can go big scale on that particular strategy.
Gather intelligence as to what the competition is focusing on and doing better. And look at what you can do to surpass them. For example; If a company’s competition is focused on the product, then you can focus more on the customers. What do the customers want? Do they want their product packaged in a better way? Or do they want their service delivered in a certain way? Listen to the needs of the customer and you are bound to go further than your competition.
Client attrition is the surest way for the death of a business. Because your customers are what keeps the cash in-flow and without this, your business cannot stay afloat for long. Ensure you provide valuable products and service to your customers. Make them feel important, talk to them, ask them what they like and deliver. Use surveys to ask them about their opinion on a product or service. Make them feel like they are part of the family and they will be loyal for life.
Poor Business Strategy
If you start your business on a poor strategy, chances are you will not go far. So from the onset, you need to make sure that you have a winning strategy. How do you achieve this? First things first, have a clear vision about what your business is. What it is meant to achieve. Set clear goals and objectives and stick to them. Have numerical targets and the documented procedures on how you plan to achieve this.
If one way does not work, document it and try another way and another until one pans out. Remember to document everything, your failures and your successes. Your failures make sure you do not repeat the same mistake again and the successes ensure you keep doing something right. Also, make sure to always review the strategy against the market conditions and change it any time you need to.
Cashflow & Debt Management
This could be the most important part of your business and the one you should be most keen on as it is the lifeline of your business. You need to constantly review costs and inventory and invest in accountancy software. You also need to set payment terms for suppliers and the credit terms for customers.
In the case of bad debts, you can employ the services of a debt collection agency. You can also check the type of loans that your business can be able to employ in the case that the business cash flow is in danger.
Some businesses have structures already set up, but there is a risk that something could happen to the structure that could not have prevented. For example; fire or flooding or vandalizing. You can curb some of these by insuring the building against all events that could happen. Make sure you capture everything. Be in compliance with the building fire regulations and install smoke alarms and sprinklers. Also, install security systems to prevent vandalism.
Health & Safety
Your business is run by human beings and for your business to continue thriving you need to make sure that you have identified all the risks that pertain to the health and safety of your staff. Identify all the hazards and evaluate all the risks involved. make sure that the staff is adequately trained for the hazards and events that could occur on site. And have all the procedures set up in highly visible areas in the event of an incident.
Loss of Key skills
No matter how much you would want a particular staff to stay on. If they find greener pastures for themselves, they will leave. So how can you prevent this from happening? Identify top performers and reward them for their outstanding performance. Not only will this make them feel appreciated, but it will also be an incentive for others to work just as hard so that they can also receive the reward as well.
Also make the workplace feel very comfortable, such that employees are able to work freely. This kind of environment is unmatched in the sense that even if an employee got a higher pay elsewhere, they are more likely to stay with you because of the serene work environment.
So many businesses have gone down due to poor management so this is a huge business risk. So what should you do to make sure that this is not a problem in your business? First of all, never give a management position to an under-qualified person, just because they are family or as a reward to someone who has been in the company too long.
Invest in training for managers, have periodic training to ensure they are not slacking in their job. Finally, have a very transparent process for raising grievances if they should arise. Sometimes the people at the bottom could notice something that is off in the management. Having a way to reach you directly could save your business.
Always make sure you are up to standards and in line with the regulatory compliance because the failure of this could lead to very hefty fines that could run your business to the ground. Your business could be closed down for weeks or even months at a time just for this negligence. If possible invest in compliance consultants who can be able to advise you on what you need to do and if found in a fix they can be able to get you out of it.
Sometimes you could lose that great customer because you couldn’t supply their goods in time. This is a huge business risk because of the mere reason that this could touch on your cash flow which is important. So how do you curb this? Your supplier could have let you down, so diversify, do not rely on only one supplier have back-ups at hand. Always have a back-up stock that you keep handy for times like these.
Theft/Damage of Products
Another huge business risk is the theft of goods or the damage of goods. How do you deal with this? You could invest in a great security system for your facility. Also, you could work with a great and reputable transportation company so that your products are not stolen or damaged in transit. And if so they would cater for any losses incurred. Lastly, you could also insure your products against theft and damages.
Business is a risky endeavour, but one that is worth it once it pans out. No one ever sees the struggles though. They only see the success and think that it is easy. If they only knew. The risks involved in business are high but they are easily manageable with the correct procedures and strategies. I hope my ways will be able to help you as you venture on this rocky but very worth it path.