Even the best, most promising business ideas include some level of risk. No matter what business you're in, consumer tastes and needs change, invoices are paid late, suppliers run low or raise prices, and regulatory bodies step in. You may not be able to control these risks, but you can understand them and learn the best ways to mitigate them. To get you started, here are 4 common business risks and suggestions for reducing them.
When a business takes on debt, it's leveraging its assets and value in order to get an advance on funds. In some cases, a limited amount of leveraging and debt can help a business bridge a capital shortfall, fulfill a large order, or invest in marketing. But when a business over-leverages, the cost of the interest and the burden of the debt can sink the company. According to Small Business Central, minimizing this type of risk involves making a budget, limiting debt to a certain percentage of your assets and/or income, and making sure you have cash on hand to stem shortfalls.
Even if you work alone, you have some property liability risks. A delivery person or visitor to your workplace can be injured, resulting in medical bills and possible lost wages--all of which need to be paid by your business. Having property liability insurance mitigates this risk by ensuring you have the resources to pay for accidents at your workplace.
In these days of social media use, more and more consumers are complaining about real and perceived problems encountered while doing business. When people complain about your company, in person or online, your reputation can easily suffer--resulting in lost business even if you haven't done anything wrong. In addition to finding specialized insurance coverage for this risk, business owners should have a reputation management system in place. Through this system, you can monitor the general reputation of your company and develop outreach skills that help to improve your overall image.
Many businesses in a variety of industries have to deal with compliance and regulatory requirements. When they don't, they may be fined or even shut down. By creating and maintaining a strong, ethical and compliant approach to doing business and keeping up with changes in your industry, you can minimize this risk while also keeping both clients and employees safer. Appoint employees whose job is to monitor and enforce compliance standards and use outside auditing services to stay on top of things.
Entrepreneurs and business leaders take risks. It’s almost the definition. But with proper precautions, risks can be nonfatal to your business. Research shows that when you are less exposed to the worst scenarios, you make better business decisions. When you limit exposure to negative consequences, it changes your decision making and empowers you to be bolder with your efforts to grow the business.
The experts at Alliance are Business Risk Professionals. We take the time to learn your business inside-out in order to make sure you know where your commercial risks are and how to deal with them in the future. Reach out to us for a free evaluation to see if we are a good fit for your company.