This guide outlines the key strategies any small business can put in place to mitigate risk.
When you start a small business, there’ll be a lot of risk involved. There’s never any guarantee of success, after all. As natural as this is, it doesn’t mean there aren’t ways to protect your small business from a lot of this risk.
7 strategies to mitigate risk
Taking the right steps help you minimize – and even avoid – more than a few risks you could come across. Unexpected events and competitors play into this.
While they’re not going to guarantee your long-term success, they’ll put you in a much better position to actually achieve it. You’ll have less to worry about, so you can spend your energy on areas that’ll actually help you succeed.
Add in the fact you’ll be less likely to run into any emergencies that’ll threaten your business, and there’s no reason not to protect your business. Seven strategies can help quite a bit to mitigate risk.
1. Protect Your Employees
While you mightn’t have thought about it, your employees can also be a risk to your business. This doesn’t refer to them not being able to do their jobs, though. Instead, there’s always a risk they could have an accident and get hurt while they’re at work. You’ll need to prevent it.
By taking steps to protect your employees, you protect your small business more than you’d think. You’ll be much less likely to pay out on worker’s compensation claims, for example. Make sure there’s nothing that could cause an accident, and have an emergency plan just in case something comes up.
2. Pick The Right Business Structure
Registering your business is one of the first steps you’ll have to take to mitigate risk when you’re starting off. As part of this, you’ll need to pick a business structure. There’ll be several options to choose from, each of which offers different degrees of protection. Make sure you know about these before making your decision.
While a sole proprietorship can be easy to set up, for example, it offers the least amount of protection for your personal assets. You could be at more risk because of it. Other options will even offer more protection for your company’s assets, making them worth focusing on.
3. Be Smart With New Clients
Countless businesses work with clients and often get paid on net-30 or similar terms. While this is standard in many industries, it provides more than a few risks. You could get paid late, or even not get paid at all. This naturally affects your cash flow and profitability, and these have a significant impact on your operations.
Be smart to mitigate risk when you’re dealing with these clients. Having a proper contract in place and getting paid at specific milestones helps avoid the risk of non-payment or late payments. Making sure to get a deposit before starting any work with clients also helps with this.
4. Get Insured
Getting insurance is a mandatory part of running a business, and you would’ve invested in it from the start. If you’re like some other entrepreneurs, though, you could’ve just gotten the legal minimum and left it at that. This isn’t always the best approach to take, though.
While this helps you protect your small business a bit, it mightn’t provide nearly as much protection as you’d like. By properly investing in public liability insurance or something more comprehensive, you’ll give yourself a lot more protection to mitigate risk. You’ll be at less financial risk if something comes up.
5. Work With An Accountant
Your company’s finances will be one of the more complicated areas to look after, but it’ll also be one of the more important. It can be more than enough to cause you a lot of stress, and there are more than a few risks associated with not managing your finances properly.
Thankfully, there’s a quick and easy way of getting around this. Working with an accountant is the best step you can take to mitigate risk. They can properly look after your taxes, payroll, and more than a few other areas, helping you avoid many of the risks associated with your company’s finances.
6. Secure Your Data
Cyber crimes are happening more and more, and they show no signs of going away. Small businesses are increasingly the focus of these attacks, and you’ll need to protect yourself from them. This primarily focuses on your business data, which criminals can use to commit fraud and other crimes.
Installing firewalls and quality anti-virus software, using strong passwords, and similar options are all great ways to mitigate risk. While that means making a bit of an ongoing investment in your cybersecurity, it’ll be worth it long-term. You’ll avoid any possible cyber risks going forward.
7. Get Legal Help When You Need It
You’ll already know there are quite a few legalities involved in starting and running a small business. With some online resources, many of these can be relatively easy to do yourself, even if they take a lot of time to get done. It’s not always recommended that you do it all by yourself, though.
There’ll be plenty of times when it’s worth working with a legal professional to help. This is especially true when it comes to specific legal issues that can be difficult to understand and can mitigate risk. They could even be harder to actually work through, but a qualified legal professional gets it done easily.
Wrapping up
Starting and running a small business takes a lot of time and effort. It’s also a risky step to take, and it takes a lot of courage and effort to actually do.
Because of that, you’ll want to protect your small business and mitigate risk as much as you can. You’ll come across more than a few risks from the moment you open your doors. Some of these will be relatively small, while others could pose a significant threat to your company if you’re not prepared for them.
By knowing how to protect your small business, and putting the effort in, you’re in a better position going forward. You’re less likely to fail because of risks you could’ve avoided.
