There are many great reasons to start a business, but it’s how you manage the business day to day that matters. Taking an idea and bringing it to life is a rollercoaster of emotions and it’s not for the faint-hearted. If you’re starting out in business it’s important to consider what could go wrong so that you can prepare should the worst happen. The risks associated with your business will vary depending on the type of business. However, there are some general business risks that you should be aware of.
If you’re thinking of starting up, consider these major risks first…
Before launching your product, you need to establish if it’s likely to succeed in the current market. Will people need it? Does it solve a problem? Is the product easy to market? How will people know about it?
It’s crucial you understand what purpose or need your product or service serves to sell it successfully. If you’re starting a business based on an idea that isn’t 100% unique, are you confident that it will really work?
What if a competitor does it better than you or a disruptor comes along and completely eliminates the need for your product? Could you adapt and diversify your product to meet market needs or will you be out of business as a result? Is your product strong enough to withstand all of these potential risks?
It’s also imperative that you understand every detail of how to bring your product to fruition.
How will you manufacture and source your product? What if suppliers no longer meet your expectations, let you down on delivery times or increase their prices?
You should also consider if the product needs certain licensing, copyrights and IP before you spend money and time creating something that may not even be legally sellable.
Consumer habits change regularly, and one day your product (or service) may be hot stuff and the next its old news. Many businesses fail to factor this into their costs and assume that what’s profitable now will be profitable for a long time.
If you’re creating a product that is on trend right now, it’s important to capitalize on your current customer base by creating other products or services that they may need in the future. Capture their data and understand their habits to get in touch with them for future purchases and increase the value of each customer.
To be at the forefront of what customers want, you need to monitor the market on a regular basis and keep track of consumer trends. This allows you to create products before they become the ‘in thing’ and stay one step ahead of your competitors.
A poor financial state is one of the main reasons a business fails. Even if you get off to a flying start, how you manage the business’ money on a day-to-day basis will determine the longevity of the business. Miss managing budgets, over-spending, miss-calculating margins and not accounting for tax could mean your business runs out of cash and fails.
If your business is running out of cash, you will need to re-evaluate how you manage the finances and even seek out investment if you’re willing to lose equity and partner up with someone. A frequent mistake is that businesses fail to reach their next milestone before the cash runs out, making it harder to get investment causing the business to fail.
In the early days of production, the business owner must play close attention to the finances and keep costs as low as possible until the business model has been proven. This means doing as much as they can themselves without paying for staff and delaying marketing and sales costs for as long as possible.
However, when the business model has been proven, and the product or service is ready to go, the business owner should take action to grow the business. This means spending money where it needs to be spent on sales and marketing. Business owners need to understand that holding on to every penny will not grow the business in the future. Establishing the difference between safeguarding cash and spending it is vital when managing the business’ financial risk.
It is vital you play close attention to the numbers on a regular basis to foresee any financial risks and deal with them accordingly. If you’re ‘not a numbers person’, hire someone who is before your business ends up in a money mess.
Health and Safety Risk
In 2015/2016, 144 workers were killed as a result of a workplace accident in the U.K.
Any business that has a workplace with employees or a location that customers visit is at risk to health and safety injuries. As the business owner, it is your responsibility to ensure the safety of your employees and customers at all times as well as minimising any risk of passing by members of the public.
To reduce the risks of injury and death in the workplace, you should carry out regular risk assessments and take relevant action accordingly. We’ve done a whole guide on health and safety in business that you can view here.
Sometimes, mistakes happen, and when they do, it’s important to be prepared. For example, if a customer slips on a wet floor in your shop resulting in them injuring themselves badly, they may make a claim against you.
It’s important to make sure you have the correct insurance policy in place before you start a business. Without insurance, if a claim is made against you by an employee, customer or third party, you will be responsible for any legal fees and compensation costs – which can be very expensive.
Poor Management Risk
Do you have what it takes to run a business? Many business owners find the starting up part easy, but have you got the guts to grow the business and do you know what it needs to get there?
It is the business owners responsibility to establish what is best for the business and how the companies milestones can be achieved.
Many business owners become so wrapped up in the details that they completely lose sight of the main company strategy. They focus on the small things on a daily basis without looking at the bigger picture. Alternatively, some business owners only focus at a high level and miss crucial details along the way that can prevent the business from growing.
A weak management team will fail at executing a strategy correctly and will also build weak teams to run the business. There is well known saying in the business world: A players hire A players and B players hire C players – because B players don’t want to work for other B players, so they have to choose C players.
A strong management team is crucial to the success of the business.
It’s inevitable that in business there will be obstacles along the way but how you deal with them will determine the overall success of the business.
Some risks you can control, and others you can’t. But by considering all of the risks we’ve mentioned above and eliminating them as much as possible, hopefully, your business thrive.