Running a business does not guarantee success.
According to Bloomberg  nearly 8 out of 10 businesses fail within the first year. This high rate of failure paints a picture of the difficult terrain that confronts all business owners.
A popular 80’s cartoon coined the phrase -“knowing is half the battle.” In business, knowing how to deal with risks before they become reality is half the battle of staying profitable.
We’ve created 4 steps you can take today to identify and evaluate risks to your business.
1. Identify Potential Risks
Risks can come in many shapes and sizes. Here are the main areas of risk that business owners should care the most about.
Where you’re based is almost as important as your product. If your customers don’t know where to find you, or they can’t easily see you in the course of their daily lives, you lose their business.
Location doesn’t just apply to physical businesses either; online location is just as important. Listing your business with proper directories and local search sites like Yelp, ensures that you show up where a customer is looking. How does your site look compared to your competition? Are you perceived correctly?
Does your business rely on a certain piece of technology? What would happen if that technology suddenly became obsolete or disappeared? Without a plan in place, or adequate preparation, you risk losing your entire customer base due to an upgrade.
Customer’s wants and needs change quickly and without warning. Whether your product is a luxury or necessity, a shift in preference can have a large impact on your business.
A downward trend in the stock market or downturn in the national economy might be seen as hiccups for large corporations. As a small business owner however, that hiccup can turn into hurricane.
2. Monitor Potential Risks
Monitoring potential risk factors might seem like a full time job, but it’s easier than you think. With a little preparation and consistency, you’ll create an early warning system that could mean the difference between going under or weathering the storm
Measuring factors like total potential customers, retained customers, and how many people have seen or heard of your particular business is a powerful way of catching negative trends before they do damage.
If you’re an online business there are many excellent tools to help you measure what matters most.
If you’re a physical location, measuring daily business can be as simple running customer surveys, engaging customers in conversation or monitoring daily and monthly sales and retention. Grapevine
Monitor any news source that would have a direct impact on your business. Not only will you have advance warning of shifting trends or new technology, but you’ll have constant access to new strategies of doing business and finding success
3. Create mechanisms to stop risk
When the worst happens you need to be prepared. Just like a fire escape plan for your home or business, having an emergency plan in place can mean the difference between going under and staying afloat. Consider organizing them into the following categories and then building a specific plan to deal with each one
- Very Likely to Occur
- Some chance of occurrence
- Small chance of occurrence
- Very little chance of occurrence
4. Create habits of analysis and evaluation
Make risk analysis and evaluation part of your daily business. Dedicate time in daily meetings and planning sessions to include potential risks and solutions.
Before making any big decisions or purchases you should evaluate and analyze any new risks that might arise.
Risk management can be considered one of the most important factors in successful business; though it’s often overlooked. Take some time today to evaluate your own company and see if you’re as prepared for potential risks as you should be.