Small businesses are proliferating everywhere across the globe, especially with the advent of the digital age. Many people, who found the typical 9-to-5 routine extremely mundane, hopped on to their entrepreneurial journey by doing something they are passionate about. It can be selling art to clothing to soaps to what not. That’s the specialty of being a small business owner, you become the master of your own game while pursuing something that enriches your soul.
Preparing for risks
However, while starting a small business is a great idea, the journey is not free of risks. That’s the case with any business but small business owners have to be particularly careful during their initial days because a small misstep can jeopardise everything.
When it comes to avoiding business risks, prior knowledge of the same holds the key. Here are a few types of risks that you, as a small business owner, should be aware of so that you can mitigate them efficiently:
1. Legal risks
A client or customer, supplier, or anybody from the public can initiate a lawsuit against you if your business has caused damage to them due to negligence. That can be an expensive affair because you will have to bear outrageously high legal fees. The possible resort you have under such circumstances is BizCover public liability insurance, which can provide the necessary coverage for your legal expenses.
Some legal risks may also come about if you fail to adhere to legal regulations. This can be with regards to licensing and certifications, corporate social responsibility, taxation, data breaches and environmental norms. You need to comply with necessary regulations without fail and insure your business to get coverage for hefty expenses when any contingency arises.
2. Strategic risks
During your initial stages, you may not have a formal decision-making system or a hierarchy in place. It’s crucial to know that the external environment is extremely dynamic and survival of the fittest is the rule. There will be several competitors trying to grab a share in the market.
As a small business owner, you need to decide your target market, organisational structure, product strategy, marketing and sales strategy, and so on to cope with external changes better. You need to probably consider infusing diverse thinking into your business and stay abreast of industry trends to remain on a competitive edge.
3. Financial risks
Finance is the lifeblood of any organisation, whether small or big. No business can function if it does not maintain a sufficient amount of cash flow and reserves. There’s money involved in everything that a business does, be it paying salaries to employees, managing regular operations and planning business expansion projects.
There may arise a situation when the economy as a whole crashes or stagnates. Such times can be really tough for small businesses because it would affect people’s purchasing power and ultimately your revenue. Hence, you need to know the various financial risks that you might have to encounter on your entrepreneurial journey.
4. Cybersecurity risks
Today’s business world is pretty much driven by technology and data. From fast-processing computer systems to robotics and artificial intelligence, technological innovations are incredibly changing businesses today. Most business operations these days depend on data something that needs to be protected. This is why businesses across the world are emphasising having strict cybersecurity measures to prevent data breaches.
In case your business utilises sensitive customer data, you need to ensure that it’s kept protected against unscrupulous hackers and cybercriminals. Any breach of such confidential information can threaten your business’s reputation and call for expensive legal battles. Taking adequate measures to protect your small business against cybersecurity risks is a crucial step towards the smooth running of your venture.
5. Reputational risks
Last but certainly not least, you need to be aware of the existence of reputational risks, which can tarnish your brand’s image in the market if not addressed on time. The goodwill that you build in the market is your biggest asset. Any small mistake on your part can ruin it for you in a minute. This is particularly true when every opinion is expressed openly on social media.
Social networks like Facebook, Instagram, and Twitter are platforms where consumers can share their feelings and experiences. Any negative feedback on these platforms can jeopardise the credibility of your small business. So, you should always keep track of your online reputation management activities to keep reputational risks at bay.
The above are some of the many risks that you might have to face as a small business owner. Being aware of them and taking measures to mitigate them will surely make a difference.
Clear Risk, Updated for 2018, Author: Craig Rowe, The 6 Biggest Risks Concerning Small Businesses [Updated for 2018], Avl at: https://www.clearrisk.com/risk-management-blog/bid/47419/the-6-biggest-risks-concerning-small-businesses
TruShield Insurance, The top 5 risks threatening your small business, Avl at: https://www.trushieldinsurance.ca/blog/risk-management/top-5-small-business-risks/
Intuit QuickBooks, Published on February 28, 2012, Author: Kathryn Hawkins, 5 of the Biggest Risks Small-Business Owners Face, Avl at: https://quickbooks.intuit.com/r/money/5-of-the-biggest-risks-small-business-owners-face/