New businesses are more exposed to risks than already established businesses for obvious reasons. For instance, new businesses usually lack fully functional business systems and effective risk management strategies. For this reason, most new businesses aren’t able to withstand even small risks. To be able to grow your start-up successfully, you must be aware of the top risks faced by small businesses. You also need to take steps to minimize the risks because it is impossible to eliminate business risks completely.
1. Financial risk
One of the most common risks faced by small businesses is financial risk. Lack of enough start-up and working capital is the major cause of most start-up failures. Numerous external and internal factors are responsible for affecting cash flow in small new businesses. One of the most common causes of financial risk is lack of a solid business and financial plan. A solid business plan gives business owners easier access to funds. A solid financial plan lets business owners know exactly what they should do in any financial situation. To avoid financial risk, you must ensure you have adequate start-up funds before you open shop. You also need a backup plan to cushion you and your business financially during hard times.
2. Legal risk
Although both small and big businesses are prone to legal risks, small businesses are more likely to be brought down by legal risk factors. Your small start-up can be sued for many reasons ranging from poor services/products to staff/client injuries in the business premises. Intellectual property claims are also common among small start-ups where you may be sued for stealing someone’s idea or even using someone else’s picture on your website without the relevant copyright.
Identifying such legal risks is crucial to protecting your start-up against the ones capable of crippling your business. You should also take the steps to avoid legal risks. For instance, you can ensure your business is 100% safe for your employees and clients. You also need to have all the necessary permissions before using third party imagery. It is also advisable to get business insurance that covers you from just about any legal risk you can think of.
3. Staff risk
This is the third most common type of risk faced by small businesses. Unlike big businesses, small businesses suffer greatly from staff risk because their success is often very dependent on a few individuals. The financial commitment associated with having a workforce that hasn’t started to generate income is huge. The staff risk factor can be dealt with through effective staffing policies and procedures. Having the right insurance can also help reduce risks like negligence, theft and other unexpected staffing problems . Staff training can also go a long way in ensuring your staff perform optimally.
Do you agree? What other risks have you faced successfully?
About Ty Rhame:
Entrepreneur, philanthropist, motivator, husband, and father Tyson Rhame is an active duty United States Air Force Reserves Lieutenant Colonel who has used his Air Force Academy education, military training, and astute business knowledge to create a wealth of success for himself. Ty Rhame Facebook, Ty Rhame Twitter, Ty Rhame YouTube, Tyson Rhame Tumblr, Tyson Rhame Blogger, and tyrhame.wordpress.com can all be used to view informational material and presentations directly from Tyson Rhame to assist entrepreneurs and cadets in their journeys to success as well as links to his business related philanthropy endeavors.