To be an entrepreneur, it takes good ideas plus the ability to go out on a limb, take chances, and keep on keeping on even when things are challenging.
However, successful business owners have to be strategic and careful in their dealings and choices, too, and not forget about potential risks involved in what they do. Many ventures fail each year due to insurmountable problems that might not have been such an issue if risk was better managed. As such, entrepreneurs must be proactive and limit risk wherever possible. Here are some key ways you can do just that.
Assess the Potential Risks for Your Business
Start by assessing what the potential risks for your business might be. After all, you can’t mitigate issues that you have no idea about. Think about things that could pose a threat now, as well as into the short- and long-terms. Examine all the possible preventable internal and external risks, so you have a better idea of which ones you can work to avoid and which you can’t.
The list of risks that could be a factor for your organization is long and varied. Some will be general business threats everyone faces, while others will be specific to your industry or venture. For example, consider physical hazards like floods, building collapses, earthquakes, terrorism events, injuries from falls or falling objects, exposure to toxic chemicals, and other health and safety risks. Factor in political and economic instability, both locally and overseas, that you may have to deal with, too.
Strategic threats are another aspect. These include new compliance issues, laws, or regulations that negatively impact operations or an influx of new competitors on the market. Financial risks are an obvious one that is sure to be top of mind, too. Consider potential setbacks such as non-payments from clients, theft, equipment breakdown, increased business loan charges, or rate increases from suppliers, to name a few.
Do as Much Planning as Necessary
Once you have a good idea of the problems you could face at some stage, sit down and plan. The more planning you can do, the better you should avoid facing massive dramas. In particular, work on your business plan. This document should contain an examination of the marketplace and your competitors, customer analysis, sales and marketing strategies, financial projections, and a SWOT (strengths, weaknesses, opportunities, and threats) analysis.
Everything you compile in this document will give you clarity about ways to address possible threats today and in the future and make it clear which aspects to keep a close eye on right now that might change dramatically and have significant impact.
Also, create an emergency management plan. This work is vital because it gives you and your team a roadmap to follow if disaster strikes. Your plan should cover how to handle both internal and external emergencies and what your managers and employees must do if the worst happens. Document exact steps, in order, add checklists for people to tick off as they go, and incorporate a timeline where possible. Make sure everyone is clear about who’s responsible for each task, too.
Take Steps to Limit Risks and Protect Your Business
The best step forward is actually doing things to limit risks and protect your business. Health and safety for staff members are essential and should be something you work on daily. Ensure all dangerous goods are labeled, packaged, and transported securely. (Train your team on handling hazardous materials.) Utilize a helpful temperature indicator and other tools en route to ensure parcels stay safe.
Ensure workspaces are kept clean and tidy to minimize the chance of slips, trips, and falls, and have everyone store items correctly. Teach employees how to safely use equipment and avoid repetitive strain injuries, and update all work-based facilities and vehicles as required.
Keep a close eye on market changes so you can better see new threats coming and protect your business from cybercriminals attacks. Always leave a financial buffer in reserve so you can continue to pay business expenses even in slower times. Control growth, too, so it doesn’t run away from you, and don’t let debt get out of hand.
Obtain assistance from financial advisors, accountants, mentors, lawyers, and other specialists to help you keep finances on track and adhere to government and other regulations. Try to diversify income where possible, too, and maintain proper records. You can also buy insurance to cover your organization against some threats.
As an entrepreneur, there’s no way to rule out risk completely. Yet, you can learn to get more comfortable with it and manage it, so it isn’t so likely to cause a lot of damage.