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.
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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!
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.
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.
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.