Any new business there is an element of risk involved. After all, taking the plunge and setting up on your own is a huge step and one that should be taken seriously. A lot of thought needs to be given to the type of business you plan to start, the target demographic and whether you have a unique selling point (USP) that will put you a step ahead of the competition.
While there is bound to be risk involved when a new business is conceptualized, there are ways in which these risks can be minimized. It may be tempting to ignore risks related to legal, financial, or staffing issues, but it’s better to know how to deal with them, and how to prevent them so that you don’t face problems in the future.
For example, while you should hopefully never face the prospect of bankruptcy, having a financial plan in place will help to minimize the risk of debt and the serious impact it can have on your business. Risk management may seem daunting, but if you break it down into stages, it shouldn’t be too difficult.
Money matters can be the bane of your business’ existence if you don’t get things in order. Both external and internal factors can hugely affect your cash flow and impact substantially on the chances of success.
Before you even start your company, you need to create a foolproof business and financial plan that you can use when chatting to financial providers, or refer to for your own benefit. Planning your financial projections will give you more of an idea of what to expect, while minimizing the risk of fumbling blindly into the future.
Make sure that you have the right amount of start-up funds available to you so that you know you can afford to run with your venture. If you don’t have the funds yourself, it’s recommended you chat to an advisory for help.
Those who can’t secure financing tend to use their own personal savings but remember that if the business fails, you also risk losing out personally.
The last thing a small business owner will want to face is legal proceedings. You could be sued for any number of reasons: failing in a duty of care to a client; a service or product you provide not performing as a client expects; a member of staff suffering an injury at work; a member of the public tripping over a piece of office equipment at your premises; or even you spilling a cup of coffee over a client’s computer. What about that picture on your website? Do you have the relevant copyright? And where did you get the idea for your business? Someone could claim that you are infringing their intellectual property.
Again, good risk management here is essential in identifying the potential risks your business faces and taking precautions which can range from providing a safe working environment, to making sure you have permission to use any third party imagery on websites for example.
You will also need to ensure that all the necessary business insurance is in place. Some areas of cover such as employer’s liability are mandatory for virtually every business that has employees. Other policies such as professional indemnity are often required by clients as a condition of working with them. Additional areas of cover include public liability and product liability as well as cover for office buildings and contents.
Investing in that first employee is often one of the biggest decisions any small business will take. Not only is there the financial commitment of a regular monthly wage to pay – regardless of how the business has done that month – but there are swathes of policies and procedures that come with taking on employees.
You have a legal duty to provide a safe and comfortable working environment. Government bodies such as the Health and Safety Executive provide useful risk assessment information to make sure health and safety isn’t compromised and that you stay within the law. As mentioned, employer’s liability cover is usually mandatory.
Staff training of course will be essential to make sure that the service your business delivers continues to be of high quality and your clients don’t have cause to complain, or, even worse, sue you.
Staff fraud and dishonesty can also be an unfortunate consequence and again, you will need to have procedures in place to prevent it from happening and deal with it if it does.
Many new businesses fail not because the product or service was a failure but because they failed to proactively tackle the key areas of risk that come with setting up any business. If you can identify the risks and deal with them before they become an issue, you will be well on the way to a fruitful future as a business owner.