A small business is unique in several ways. Usually, it lacks the vast resources and skill sets large organizations tend to have, and yet they share similar risks with their larger counterparts. This mostly makes small businesses more vulnerable, as they’re usually not well-equipped to handle these risks. That is why small business owners need to employ various risk-mitigation strategies to help control or minimize the effects that such risks have on their businesses. So, if you’re planning to start a small business, here are some common risks to expect and how to avoid them.
- Financial risks
The biggest risk that any small business faces is financial, and it makes sense. Starting a business in the first place requires some level of financial investment to get the business off the ground. As the business progresses, you’ll have to deal with cash flow issues, invest in marketing strategies, pay employee salaries, and more. In most cases, it may take up to 24 months for a startup business to start earning significant profits. That leaves a huge financial gap you’ll need to cover until the revenue starts flowing in. Other potential financial risks include serious recession and natural disasters.
It is necessary to factor in the present and future business climate and prepares your business, and let that guide how you negotiate to purchase terms and prepare for tough financial times. Another way to minimize your financial risks is to create an emergency fund. Experts recommend setting aside at least three to six months’ worth of your monthly spendings in a fund you can assess at any time.
- Security risks
Guarding against security risks is a must for any small business. According to security experts, small businesses lose more than $25,000 due to cyber attacks. Cybercrime can also leave a massive dent in a business’s reputation, especially when it compromises employee, client, or business data. Moreover, hackers are becoming increasingly sophisticated with their approach, and it’s important for business owners to put in place all the essential cybersecurity measures to minimize the risk of cyberattacks.
Other forms of security risks include physical attacks on your business premises. Even if your business is located in a safe area, it is wise to ensure that you secure all entrances, keep sensitive files under lock and key, etc.
- Liability risks
Almost every business faces one form of liability risk or another. But for a small business owner, the repercussions could be even more grave, as you may not have the depth of resources needed to cover the financial damage. Liability risks could come from property damages, customer or staff injuries. One way to handle such liability is to invest in sound legal advice.
Another effective option is to purchase business insurance. The right business insurance package will depend on which field or type of business you’re into. For example, if you operate as a tradesman, you can invest in a tradesman insurance package specially put together for your type of business.