- If you’re ready to grow your business, consider how you’ll mitigate against some of the common risks that small businesses face.
Are you ready to take your small business to new heights? The decisions you make will determine how successful this next phase of growth will be. With a smart risk management plan, you could put your business in the best position for sustainable growth and great prosperity.
Before you can make a plan to manage your business risks, you must first understand what they are. Every business is different, and each has potential roadblocks that are unique to its industry and the business itself.
Here are three common small business hazards to help you kickstart your risk management plan and minimise costly exposures:
1. Business debts
It takes money to grow a business. You will generally need a large sum of money to open a store, buy new equipment, hire more staff, create new lines, take on a large contract, or do other growth-related activities. You’ll also need working capital to keep your business running until these investments start paying off.
Some businesses may have a cache of savings to draw from, but many do not. Taking out a small business loan is a common way to grow a business. Before considering debt, it’s important to have a solid understanding of your business’s financials to ensure you can meet the demands of interest and fees associated with your loan.
Explore articles about financial management here.
What can you do?
In preparation for lending you might consider:
Borrowing within your means – Overborrowing can make it harder to repay what you owe, especially if you already have existing debt that you are paying down. Limiting your loan to what you can comfortably repay may make it easier and less stressful to do so.
- Do your research – Take the time to compare different loan options by speaking with a banker who can help you identify the most suitable loan for you.
- Find a good accountant – A financial pro could help you understand how interest payments will affect your bottom line, how to best put your loan money to use, and help you take full advantage of available tax deductions.
2. Decreasing product or service quality
If you’re ready to grow your business, it’s likely because you sell a great product or provide a stellar service. You’ve built a brand that people trust, and you’ll want to keep that going as your business starts to get bigger.
Find out about the different types of business lending here.
The risk of producing a sub-standard product or decreasing service quality can increase as a business grows, especially if you expand too quickly or without the right growth strategy. Drops in quality can alienate your existing customers and dilute your brand. This can be hard for a business to bounce back from.
Ask yourself if your small business is scalable. If you hire help, can they do the job as well as you or are people are paying for your unique skillset? Can you create your product to the same quality in less time? Not every business is able to grow its operations and maintain quality.
Use this checklist to help you plan how you’ll grow your business.
What can you do?
To maintain the same high standards as you grow, you might:
- Make your standards a priority. Investing in hiring, training, and quality control measures could help your business maintain the level of service that your customers expect, whether you’re personally doing the work or not.
- Grow your support channels. The bigger your business becomes, the more support it will need. You might consider hiring support staff, such as a bookkeeper or marketing assistant, to help with office tasks so you can focus your attention elsewhere.
- Know your business. Don’t force a big expansion if your business isn’t the type to scale up easily. You may need to grow at a slower rate to maintain quality.
- Listen to your customers. What do your current customers want or need from you? If they’re clamouring for an improvement, this might be a good place to begin your expansion plans.
3. Neglecting to protect your business
Growing your small business will likely mean opening yourself up to new and bigger risks. The insurance policies you have now may not provide enough coverage for expanded operations. You may also be missing coverage for new exposures that come with getting bigger.
It can be easy to overlook business insurance or forget to review your current policies each year. However, you could be leaving yourself vulnerable to common exposures if you don’t. As the amount of risk you take on increases, you might want to increase your insurance protections to match.
What can you do?
To better protect your business against expensive claims and lawsuits, you might:
- Insure your legal liability – How and where you work, as well as your industry or occupation, can impact the types of risks your business may face. For example, public liability protection could help protect you if a customer slips, falls, and injures themselves in your shop. Professional indemnity insurance may be required by law for people working in specific industries, such as accountants or health professionals. You can visit BizCover.com.au to learn more about specific industry business insurances.
- Assess what business property you have – Business property can refer to anything from a work premises that you own and storefront windows to your tools of the trade and electronic equipment. If it’s necessary to get the job done, then you may consider insuring it against theft, loss, breakdown, and damage.
- Protect your network and computer systems – Cybercrime is becoming more common and increasingly sophisticated, as are the more traditional hacker weapons like phishing, DDOS attacks, and session hijacking. Cyber liability insurance may not prevent an attack, but it can help you deal with the fallout of an attack, data breach, or other cyber incident.
Read our article about ways you can protect your business from cybercrime
Upwards and onwards!
Growing your small business into something bigger and better takes courage. You may make mistakes along the way, but how you handle them can make all the difference. Savvy decision making could help you avoid many risks associated with funding your vision, keeping your customers happy, and protecting your business.
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