Risks could crop up for any small business, from cybercrime related to online banking to legal liability. And while the rewards of a successful venture far outweigh the headaches, owners and managers should still take the proper steps to ensure that everything is operating as well as it should be.
For many, this means having a good risk management strategy and a strong financial plan. The more prepared a small business is, the easier it will be to avoid problems and grow. These common issues are often more serious for fledgling firms still establishing their footprint in their industries, so the correct precautions should be taken.
Don't skip over legal aspects
While it may sound obvious, many small business owners may be tempted to skirt the law when starting a new company. However, this is never advisable, according to Lee Colan in an article for Inc.com.
Colan explained that some firms take less risk the more established they get, mostly because of agency oversight, consumer demands or ethical responsibility. On the other hand, younger companies often do the exact opposite when it comes to employee-related compliance.
For example, areas like 401K deposit requirements, fair selection and promotion practices, as well as wage and hour laws should always be adhered to, Colan noted. Small businesses can start by placing an importance on sections with the most legal exposure and resource demand. Owners should focus on limiting liability, allocating resources and taking advantage of missed opportunities.
Think about all the risks
While some aspects of a business may feel like a greater priority than others, risks could appear everywhere. According to Mike Periu, director of the Council for Economic Education and contributor to The American Express OPENforum, the first goal is to identify risks.
Periu explained that the areas to look at include property losses, business interruption or liability losses. These key elements could seriously impact an operation, and end up resulting in major expenses. Then, owners should determine just how exposed a company is to each risk. Essentially, what the odds are that something could happen to the business.
Once a firm understands where the problems may arise, it could begin to draft a contingency plan, according to Periu. Many options could fit nicely into a financial plan, such as new policies to improve workplace safety or installing a security system. As long as a small business owner puts in the needed effort to best protect a venture, managing risk will be a fairly easy task.