Risks are present in many shapes and forms for every business and there can be many risks that can potentially impact your small business. Some risks can relate to company culture and employee management, while others may lead to potential legal issues. Either way, minimising business risks is a top priority for most business owners.
If not managed well, these risks may put your business in jeopardy, which means that clearly defining and understanding the risks your business may face can be key to reducing their impact on your business. As a small business owner, it can be hard to avoid risk in business, but you may benefit from assessing and evaluating the potential risks as part of your business planning.
Here are some of the most popular methods for reducing small business risks.
1. Reduce your risk with business insurance
Business insurance is one of the most common ways for small business owners to reduce their risk. Small business owners can choose from a variety of business insurance products to reduce the risks to their business. Common types of business insurance for small business owners include:
- Professional Indemnity insurance;
- Public Liability insurance
- Cyber Liability insurance; and
- Business insurance.
2. Diversify your services or products
Keep in mind the old adage, ‘don’t put all of your eggs into one basket’.
Diversifying your business offerings can be a smart strategy for reducing your risk. This not only allows you to offer more options to your customers, but it also gives you multiple revenue streams. You can also gain an edge over your competitors by diversifying your products and services.
3. Limit how much money you borrow
Many business owners take business loans because at face value they seem like a good idea. Although they may provide enough capital for you to start or realise those big picture plans for your business, they also pose risks for your business. A common rule of thumb when it comes to small business loans is to only borrow money from your bank when you’ve exhausted all other options for securing capital.
4. Keep track of everything
Document all transactions that occur in your business, such as sales, tax obligations, capital expenditure, and operating costs. You may also ensure that your employees properly document everything, from signing cheques to reconciling the books.
This can reduce the chances of fraud or theft impacting your small business. Closely and clearly documenting your finances also helps to keep track of where they are. You can also identify whether your spending decisions are appropriate.
5. Identify and hire superstar employees
Employees are the backbone of every successful small business. There are many talented individuals out there who have great skills but may not feel valued in their current role. With the help of a recruitment agency or a HR specialist you may be able to identify such individuals and pitch to them to come and work your business.
6. Carefully manage the reputation of your business
While short-term success can be great for your company, in terms of the bigger picture it is more important to ensure that your business achieves steady organic growth in order to thrive over time. Building an enviable reputation is one way to do just that. A great reputation will help customers and suppliers trust you; and it goes without saying that maintaining your business for the long-term is that much easier when it has a great reputation.
9 questions to get you thinking about reducing your business risk
Are you taking unnecessary risks in order to grow your business? You may actually be doing just that – but you may be unaware that you are. If that sounds a little familiar, here are 9 questions that you may use to gut check your existing business risk management strategy – and then adjust it if needed. Answering the following these questions may help you to start thinking about how you may reduce the risk to your business.
1. Who can you rely on?
In your small business if a key employee resigns or becomes ill for an extended period you will soon realise how much you depend on that individual and their skills and knowledge to get things done. To reduce this risk, ensure that you have talented and trained staff in your team who can step in and fill the void when a key employee resigns or is on extended leave.
2. Do you depend on a limited number of suppliers or customers?
Say your business has one primary customer who comprises more than 30 per cent of the turnover in your business. How would your business manage if that customer out of the blue stopped doing business with you? And the same goes for suppliers – how would your business fare if a key supplier became bankrupt, or if they signed an exclusive deal to only supply their goods to your biggest competitor? How would you respond?
3. How healthy is your cash flow?
Cash flow is king for all businesses. How would your business manage if a key customer changed its payment terms, or a supplier demanded to be paid immediately upon delivery of stock?
4. Is late payment a problem?
If late payment and bad debts are already causing problems, it’s time to review your dunning process, covering everything from gentle reminders to legal threats.
5. Is growth putting a strain on your business?
SME business owners can often find that they’re pulled in different directions as their business ramps up. In such situations the challenge for business owners is deciding where and how to best spend their time for the good of their business.
6. When was the last time you reviewed your competition?
Competitors can come from nowhere – especially in the digital economy. What’s your plan B if you’re faced with a rival undercutting your prices or launching attractive new products?
7. Is your technology up to date?
Today technology is evolving faster than it ever has and can offer business owners greater insights and efficiencies when it comes to how their business is performing and how it operates. To avoid the risk of being left behind by your competition, you may benefit from embracing new business technology solutions
8. Do your employees use their own devices for work?
Cybercrime is a risk that is firmly on the rise; as such, cyber compliance requirements for business owners are also on the rise. If you have employees who use their personal mobile phones and laptops for work tasks, the risk of data leakage or security breaches increases, as does the threat of irreversible data loss if the device is lost or stolen.
9. Is your finance team trained to spot fraud?
Financial risk in business, whether internal and external, is a growing threat for small business owners. Does your business have the processes in place for when a supplier changes their bank details, or when a customer wants a delivery to a new address for example?
Business insurance made oh so easy with BizCover
As you scale up your business and calculate risk, you’ll want to ensure that what you are building can endure for the long-term, and this is where business insurance can play a leading role. Business insurance provides cover for your business’ premises and contents against loss, damage or theft, also offering protection against financial loss experienced from an insured interruption to your business.
Have you got your business insurance sorted? At BizCover, we make purchasing business insurance quick, easy, paperwork-free, and drama-free. Our cutting-edge online platform gives small business owners the option to compare competitive business insurance quotes from leading insurers. Get your business insurance done and dusted in less than 10 minutes and carry on with scaling up your business.
To learn more about how business insurance can reduce your risk, visit the BizCover website and compare competitive business insurance quotes, get covered in only 10 minutes, avoid paperwork, and get back to business. If you prefer to speak with us, you’ll reach our friendly team on 1300 920 864.
This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.
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ABN 68 127 707 975; AFSL 501769
