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Last Updated on by Noni May
Every business has some level of risk to it, whether that is financial or not being compliant with some rules and regulations. When you own a small business, these risks are something you have to accept, or you will not start a business in the first place.
Financial problems are sometimes the biggest risk a business faces. It is not always down to whether they are profitable or not either. The problem can occur because of cash flow instead. Especially if they offer credit terms to other businesses, sometimes the cash does not come in as quickly as it needs to go back out.
The ideal is to have 3 to 6 months overheads in a savings account earning you money, which you can draw on if you need to. This can always be put back when the cash does come in but in the meantime, it could save you the embarrassment of not being able to pay someone’s salary.
Could your business be vulnerable to legal proceedings because of a faulty product perhaps? Do you run a health clinic and are concerned that none of your employees are sued by a disgruntled patient? The best way to avoid situations such as these is to ensure that any goods you sell are health and safety compliant and if you run a health clinic, use HIPAA Compliance by NAHS to make the likelihood of this happening far less. These are just two examples of legal implications that good affect your business, there is no end of others.
Warnings can come from anywhere and you should never ignore them. If your largest customer suddenly starts taking longer to pay, for instance, perhaps you need to reduce the number of goods you supply them with. It could be an employee that gets concerned, a supplier or anyone else. If you receive warnings listen to them and at the very least investigate what you are being told.
In fact, a common mistake that many businesses make is to let one customer become the most important part of sales. You should try to have many smaller customers rather than one big one, as if they hot trouble, they could take your business down with them.
You should limit your personal liabilities against any situation by forming an LLC. Hire a good accountant to take care of this for you, and an attorney that will check out any contracts you sign.
If you never take any risks at all your business will stagnate. They are a necessary evil of running a business but you should manage the risks you do take, to give your business a chance of the best outcome from them.
It was Mark Zuckerberg who said, “ The biggest risk is taking any risk…. In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks” He has also commented in the past that if he had not taken risks, Facebook would not exist.
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