(By: Brittany Brooks)
Business owners face a number of challenges, but how to mitigate risks in a new business can be one of the most difficult to navigate. The actual number one risk is always financial, but what about the other risks that sneak up on you when you’re not looking.
20% of new businesses fail within the first year, and 50% of new businesses fail within five years
These can be internal or external business risks, such as:
- Market conditions
- Bad location
- Sustaining a good reputation
- Labor shortage in your industry
- Employee injuries
- Insufficient technology
Let’s dig in, to find out how these risks can affect your new business and how to develop a risk mitigation plan to soften the impact if they occur.
External Business Risks
External business risks can be factors within or outside of your control. Learning about the possible challenges you’re facing may help you get ahead of the issue.
The Market Dictates Everything
There are ups and downs in every industry’s economy; that’s a given fact.
It’s essential to know your industry trends and how they relate to the overall economy. This information may impact the sale of your product or service, so don’t underestimate the market you’re preparing to enter.
Do a market analysis to test the temperature for what you plan to offer. Find out the:
- Product/service demand
- Customer behavior
- Target audience, etc.
You’ll then be able to decipher how to approach your prospective clientele, their buying behaviors, and how to bring value to them.
Location, Location, Location!
In real estate, having a good location is a cornerstone to the sale of a property, which stands true in business. Businesses may be in environments with volatile weather, e.g., hurricanes, earthquakes, and tornadoes. There is property insurance to cover these situations, and it’s wise to have it because you don’t know what will happen in such an environment.
Your new office could be right in the middle of a violent neighborhood or war-torn country. It’s hard to stop the violence in certain areas, and you typically have to enlist the help of the local politician and police. There’s no guarantee that you can root out the violence even with that.
Research the neighborhood, city, state, or country where you plan to set up shop to discover if that’s where your business should be.
You Have A Reputation To Protect
Like in a bad high school movie, it’s all about reputation. When you’re in business, word-of-mouth travels fast, and when something negative is released regarding your company, it travels even faster. A bad reputation can cause a loss of profits, clientele, and the possible demise of your business.
Manage your reputation by:
- Under-Promising And Over-Delivering
It’s okay if your customer has low expectations, and then you blow them away with excellent results. That’s one way you can improve your reputation and increase customer satisfaction.
- Monitoring Business Reviews And Comments
Keep an eye on what’s being said about your company. Take the feedback seriously and be readily available to reach out to customers to resolve their issues and concerns.
Internal Business Risks
Internal business risks are usually the risks that sneak up on you the hardest, because they’re so often packed with betrayal. We’re always looking for outside factors to get in our way, but it’s rare to think about the risks within your establishment.
Good Help Is Hard To Find
By now, you’ve heard of “The Great Resignation” and how it’s plaguing employers all over the US, but that’s not the only problem working against new businesses. A lack of quality candidates is another issue, especially if your company requires skilled workers to maintain business operations.
What if you hire the wrong employee?
A bad hire could cause more damage than not having anyone at all. Their mistakes are costly, and once you fire them, you’ll have to go through the hiring process again.
To attract better talent, take a look at your:
- Company’s benefits
- Company culture
- Job description
- Policies and procedures
Employees Are At Risk Too
We never plan for it, but there’s a chance one of your employees could get hurt on the job. If it does happen, you have to cover their medical expenses, a portion of their lost wages, and rehabilitation costs.
First, ensure you have workers’ compensation to back you up and cover the costs of an injured employee. Second, be sure that you’re compliant with all state and national safety regulations, like the Department of Labor and OSHA.
You Need Technology To Survive This Game
Having the right technology can make or break business operations and sales.
You want something user-friendly for your employees and customers. If anything is running like a hamster and wheel is inside, you might want to upgrade for a smoother operation.
Look into the software or hardware you may need to achieve that. Once you find and install what your business needs, ramp up your cyber security. Companies are being hacked every day, and you have to protect your company’s and customers’ private information at all times.
Developing a risk mitigation plan is critical for risk management and your overall business planning. It identifies and accesses the possible damage each risk could have on your business. Once the risks are evaluated, decide which ones are acceptable risks and prioritize the rest with the least acceptable risk at the top.
From there, you can get a good look at what you’re facing from all sides and decide the best course of action.