When it comes to business, small businesses seem to always be the underdog, having to always fight harder than normal to get anywhere. And even though all businesses are prone to risks and dangers, small businesses are perhaps more at risk because they lack the resources that big businesses have at their disposal. Things like a poor business plan/idea, too many similar businesses in the area, lack of customers/clientele, and no cash flow are just some of the reasons that there are many dangers and risks to opening a small business. But that doesn’t mean you can’t overcome them and make your business a very successful one.
1. Increased competition
When starting a small business, no matter what kind, think carefully about the location and check how many other businesses there already are in that area like yours. This will give you good sense of the necessity of your business in that area, what you can offer that is different – or whether what you are offering is already in oversupply. For example, if you want to open a cafe in your neighborhood, but there are already two established cafes in the area, you have to ask yourself what you can offer customers that the existing cafes can’t or aren’t already offering. And yes, while competition can be healthy, a point can be reached where there are too many of the same businesses in the same area. All of which, on a basic level, can be exactly the same. So, no matter what your business is, consider carefully where you locate and what you can offer customers or the community as a whole.
2. Reputation risks
We all want to be the best at what we do and have a good reputation to go with it. But we can’t control what others say about us behind our back, or even on social media. Reputation is very important to businesses, no matter how big or small they are. So when someone starts saying negative things about you and/or your business, the first thing you’ll want to do is defend yourself against their claims. Throughout that process, though, and even when you start your business, it is important to ask yourself the following questions:
- Is there anything that poses a threat to my reputation?
- Are people bad-mouthing me, or my business, through word-of-mouth, flyers, etc.?
- Is something I’m doing, or have done, contributing to my poor reputation?
In answering these questions, keep in mind that a lot of factors can go into having a poor reputation, not just unsatisfied customers/clients. Anything and everything you do as a businessperson within your business affects your reputation and how you are perceived.
3. Supply chain claims
Depending on the business you run, where your supplies come from will matter differently to you, your customers and how you advertise your business than it might for a company who has stores around the world. For example, if you advertise as an all-local cafe, make sure all you products are locally made. The same even applies for outsourcing work. If you are a mechanic and you advertise that you can fix any and all types of cars, don’t send customers to Steve down the road, who may only be a hobbyist. On toy cars. From China. Not only will customers be annoyed that they have to see someone else at another location, you also open yourself up to legal ramifications like false advertising. Which can also damage your reputation.
4. Not having insurance or being under-insured
Having insurance is more than just a sensible decision for peace of mind. Like insuring a vehicle you value, getting insurance for your business is something you have to do in order to protect yourself, your business, employees and customers — just in case any accidents happen with staff during a shift or guests/customers on the premises. So, no matter what insurance you need for you business, make sure you get it, get the right cover, and keep it up-to-date.
5. Growth plans with no consideration of the cash required to fund growth
It may be a long-term goal of yours to grow your business and have a larger operation or branches in several different locations, but you have to have a plan for doing so first. This includes establishing your business in your first location, letting it grow, gaining a customer/client base and advertising your business so people outside your immediate location know about you and where you are. Then, after you have established your business and are making a profit, you can start considering expanding your business and opening another store in another location. Trying to do this before you are making a profit can only end badly because you do not have the money to open a third, fourth or even the second store– and you will be poorly prepared for setbacks with no financial buffer zone.
6. Digital failure, cyber attacks, Internet fraud and scams
The Internet is a great way to advertise your business, no matter what it is. It is a place where a lot of people spend time, shop and find out what and where businesses are. But, in advertising your business online, you have to be wary of Internet frauds and scams, and not just from a customer point of view. It is possible somebody could duplicate your business material and use it to scam customers. Or scammers could hack your database and hold it for ransom – an increasing problem for small businesses, who are then asked to pay $5000 or $10,000 to get the database back. So, ensure you have proper daily back-ups of your database and website, so if you are hack it is just the work of a few moments to replace the ‘hostaged’ assets. And if you have social media pages, billboards or any kind of advertisement for your business, make sure customers can tell which is the official business. If you discover somebody counterfeiting your advertising, put a warning about it on your own ads and website.
