If you own a small business, you already know that you don’t have the resources that a large corporation has. You don’t have access to the same talent, knowledge base, or finances that you can weather storms as easily. Many small business owners are primarily concerned with revenue and finding new ways to bring in more. This is the primary goal of any business, but you should be concerned with other things as well.
Risk is a big part of owning a small business. For many entrepreneurs, it means risking your livelihood to live out a dream of working for yourself. Maybe you quit your job and have devoted your life savings to your company. Whatever the risk is, it can profoundly affect your success or failure. Therefore, it’s crucial that when you are developing your business and preparing to launch, you are aware of all of the risks you might encounter to prepare for them properly. Here are some of the most significant risks for small businesses.
Financial risk is perhaps the most significant concern you should have as a small business owner. If you are not bringing in the revenues that make it worthwhile, you may have to close up shop. So many entrepreneurs have devoted everything they have to a new business, only to end up not being viable after a short period. Or they don’t have enough money coming in to cover their initial investment quickly enough.
Even if you are bringing in revenue, you need to make sure that you have a handle on your cash flow. Cash flow is the amount of money you have on hand to pay your expenses. You need to regularly pay salaries, utilities, rent or mortgage, and vendors. Issues can arise when the timing doesn’t work out. For example, you may have just invoiced a client for a hefty amount that is due in 30 days. However, you have to pay your staff and your electricity bill in the meantime. If you don’t have the cash to cover those things, you might find yourself in trouble.
While building your business, you need to make sure that you are conservative with your spending. You might not overspend what you are bringing in, but you will have problems if the timing doesn’t work out. So do your best to get loans or investors to help cover those initial months while getting on your feet.
The greatest asset a small business can have is its team of employees. Most small businesses work lean, meaning there are very few contingencies if people get sick or hurt at work. A work-related injury that requires intensive or urgent care could happen even in a safe work environment. While it can be managed, it becomes challenging if someone needs compensation for that injury to help with medical bills and lost wages.
The cost of compensating someone for their medical bills can be astronomical. Plus, if they aren’t working, they will need help with their bills and other expenses. All of this can add up quickly and put you in a financial hole from which you might not be able to dig out. Getting workers’ compensation coverage for small business will ensure that your employees are protected and that your business is protected. They can worry about getting better and coming back to work. You can put your mind at ease knowing that you won’t have to pay the exorbitant costs and you won’t be leaving your workers in the lurch.
No matter what kind of business you operate, there is always some liability. For example, a customer could slip and fall onto your premises. They may require medical attention and rehabilitation for their injuries and claim that you are liable for it. Or, you may say something in your marketing that a competitor finds libelous. Another type of liability is if you have a data breach and your customers are victims of identity theft or fraud as a result. On top of all that, the simple fact is that someone can sue you for any reason they want, even if you haven’t done anything to deserve it.
Even if such a frivolous lawsuit is thrown out, you will still need to hire representation. If there is merit to a lawsuit, you will have to pay for witnesses and investigations. In the end, you may also have to pay for any damages. These costs can add up to be in the hundreds of thousands of dollars, especially if things are stretched out over several years. If your small business is like most others, you can’t afford to absorb those costs. Ensure that you have adequate general liability coverage to protect your business so that it doesn’t go belly up because of a single negative incident.
You might think that it can’t happen to your business, but the fact is that it can. Your small business is your source of income, and you have the equipment and assets to make things work. If you don’t protect them from theft or vandalism, your business could be in big trouble. You should take all necessary steps to make sure your business is secure. Have reliable locking systems installed and a camera system if you can afford it. It has never been more affordable to monitor your business around the clock with webcam technology.
Security should also include the data you take in from clients and your staff regularly. Ensure that you and your employees have strong passwords for any databases or applications you use. Also, it would be best if you only used encrypted cloud storage solutions to prevent access by hackers and criminals. If your data is accessed, it will not just cause problems for your clients but also severely damage your reputation and make it hard to bring in new customers. Therefore, do not take your security for granted.
Your equipment and property are not just at risk from theft. Other things can cause damage as well. For example, electrical fires, plumbing leaks, natural disasters, and flooding can all cause damage or destroy your property, leaving you with colossal renovation and reconstruction costs. While there’s no way to prevent some of these things completely, make sure that you get regular fire and plumbing inspections to catch issues before they get too big. Plus, you should have commercial property insurance to help with repair and replacement costs and compensate for your business being interrupted.
Risk is a big part of being a small business owner. Since you probably don’t have the resources to manage every possible bad thing that could happen, make sure your business is protected to keep it afloat no matter what comes your way.