5 Ways to Manage Small Business Risks
Anyone who’s familiar with the stock market can quickly tell you about the risk/reward tradeoffs of large and small companies. So-called “large-cap” stocks typically offer lower growth potential, but have the financial resources and broad product lines to fend off competitors and survive in times of economic stress. “Small-cap” stocks have explosive growth potential … but a number of risks that increase the likelihood of a failed investment.
Small business risks are a lengthy list that includes everything from smaller product lines and narrower geographical reach to low cash reserves and less-than-ideal access to affordable credit, especially when times are tough. And that’s a mere fraction of what small businesses have to stare down every year.
But most problems have a solution, and that’s the case for just about all small business risks. The following are some of these risks – as well as some of the products to seek out and strategies to adopt that will help you prevent, manage and survive these dangers.
Small Business Risks, And How to Manage Them
1. Property Losses: Some small business risks are no secret, and that includes property losses. Fires are the most common type of risk to a building, as well as the people and company property inside it. But there are other threats, such as flooding (whether it’s caused by plumbing or a natural disaster), storm damage, earthquake damage, etc.
Property insurance is naturally one of the best things you can get to protect against these risks, as the resulting payouts can help you rebuild and get back to square one. But there are other measures you can take to help minimize losses and keep your employees safe. Basic steps include making sure fire alarms and sprinklers are installed in your facilities, having an escape plan and making sure all company data is digitally backed up regularly.
2. Business Interruption Losses: The thing about insurance that covers fire and floods is that it will tackle what you’ve lost to those disasters. But it won’t cover all of the profits you missed out on because your operations were shut down – nothing going through the assembly line, no salespeople making calls, nada. But there is insurance for this very specific and necessary issue: business interruption insurance. However, it also helps to have an ally that can help you calculate your business interruption losses and ensure that you get correct, timely payments from the insurance company.
3. Brain Drain: Having a high-quality workforce is pivotal regardless of whether you employ two people or two thousand. But the loss of a stellar employee is naturally going to make a bigger dent where they represent one-half of your workers rather than one-two-thousandth. So brain drain – losing your best employees – is a significant concern. It’s also a significant risk, given that small companies typically don’t have the financial resources of their larger competitors. Employee retention methods, such as being flexible with scheduling and focusing on continued talent development, will help cut down on important workers walking away, interrupting important growth Initiatives.
4. Compliance Risk: Compliance is something that most business owners are 100% behind in theory. We’d all like to run a clean business that keeps everyone – as in, federal regulators, the IRS, etc. – happy. Actually doing it is a different, more difficult, story. Compliance covers a wide field of areas, from federal laws to permit rules to the tax code. And the consequences of not being compliant can be severe, including financial penalties, costly measures to get up to code and even suspension of necessary licenses.
5. Technology Risks: At this point, when you hear “technology,” the brain instantly snaps to things such as computers and data backup. We’ll get to that. But technology risks differ based on what kind of business you run. For instance, if you actually manufacture products, you’ll want to have emergency generators so you can continue some level of production in the event of a power outage. But yes, if you’re more of a services company, you’ll probably have data concerns, which means you’ll want to have some sort of off-site cloud backup system to keep all your records intact should something happen to your computers in the office. Cybersecurity is another technology risk – something you can mitigate with things such as antivirus programs and third-party managed services.
There are still more things to watch out for, such as internal fraud, liability to damages your company causes and privacy standards. It sounds like a lot … and it isa lot. But McManamon & Co. can help. We are an accounting, tax, fraud, forensic and consulting firmthat offers a wide range of services that help small and midsize companies survive, and thrive in, a complex and competitive business landscape.
Small business risks are many, but the right ally can navigate you through them. Call McManamon & Co. at 440.892.9088 or contact us online today.
Tags: accounting, business interruption, consulting, McManamon, small business, small business risks | Posted in Consulting, McManamon & Co., small business