Common Business Risks and How to Minimize Them
Owning a business is extremely fulfilling, especially when it helps solve a problem that many people face. It’s not always going to be rainbows and bowls of ice cream with sprinkles though. You are going to face challenges and business risks that could completely destroy your company. To help you sidestep these, below are some of the most common business risks you’ll face, along with some risk management processes you can use to keep your LLC running smoothly.
1. Cybersecurity Threats
One of the most common business risks that we hear about on the news these days is a cybersecurity or database breach. This is where hackers infiltrate a businesses network and steal private information about their customers (social security numbers, addresses, phone numbers, email addresses, banking information, credit card numbers, etc.).
To help minimize this risk, be sure to have the necessary firewalls and network security in place. Beefing up your antivirus and malware protection would also be a good idea. This will protect against hackers gaining access to your system and using your network to release private information.
2. Injuries at Work
Injuries happen; it’s a fact of life. But the last thing you want is someone within your business getting hurt while at work. You don’t want an employee to suffer from an injury — and you don’t want the legal ramifications if that employee decides to sue you.
Here’s how to minimize the business risks of people getting hurt on the job:
- Make sure your equipment is in good working condition
- Ensure staff are properly trained
- Put guidelines in place for safely doing specific jobs and tasks
You should also make sure your place of employment is kept clean and in good working order (no random items on the floor that someone can trip on). If someone cleans the floor and it’s still a little wet, put a wet floor sign in the area. Overall, try to be more proactive with injury prevention in the workplace and minimizing the risk of bodily harm.
3. Burglary and Stolen Property
Your business probably has valuable assets that someone could steal and resell. You also own information that could put your business at risk if stolen. Burglary is a common risk that many of us face on a daily basis. It’s sad to think that we need to be more aware of our surroundings and belongings, but this is the world we live in. Desperate people may break into your business in the middle of the night, or your employees may end up with sticky fingers.
To minimize such business risks, you need to invest in a security system. Yes, you need sensors on doors and windows — but you also need cameras both inside and outside the business. You don’t know what you don’t know, so having cameras will allow you to capture things that are happening and ensure your building, the people inside and your property are protected.
You should also be sure to have business insurance that can cover the costs of anything stolen so you aren’t forced to eat the loss and pay out of pocket to replace something.
4. Use of Intellectual Property
Having a competitive edge gives you a tactical advantage in business. The last thing you want is to come up with an idea that helps your business explode, and then see all your competitors using it to steal customers away from you. This is another common business risk: someone taking your intellectual property and using it against you.
If you have something you don’t want others to get access to, file trademarks and patents to protect your intellectual property. If someone then steals your IP, you have the legal right to force them to stop (and even pay you for lost revenue and damages).
Should you decide to trademark your business name, for example, Incfile can help you with a search process to ensure the name you choose is unique and able to be protected.
5. Slow Payers
Slow and late payment is a business risk that can creep up on you and have big consequences on your bottom line. But it can be minimized in several ways. First, make sure you always have contracts in place so clients can’t say they never agreed to pay you for your service or product.
Second, try to work out payment plans for those customers who need it. If they need monthly payments to be able to get your contract fully paid, consider allowing this flexibility. You could very well find yourself with a loyal customer because you were understanding and willing to help them find a solution.
6. Negative Press Online
Negative press online or on social media is another extremely common business risk. It only takes one person to start a fire that you’re left spending hours, days or months trying to put out. Most of the time, negative press stems from a poor customer experience. While you might not know exactly what happened, you need to get to the bottom of it and figure out how to make the customer happy.
Reach out to the individual and ask them to describe what caused them to speak poorly about your business online. Understand their issue and try to resolve it professionally — don’t be defensive or angry when responding. After it is resolved, ask the individual to please explain online (wherever they spoke negatively about your business) that the situation has been handled and corrected.
If you have negative press that is completely false, get with your attorney — they can generally get it stopped and removed fairly quickly.
7. Hiring Unqualified Employees
Hiring someone who’s not qualified for a job can cause you to burn through money by paying the individual a salary above the value they can offer with their skills and abilities.
To minimize this risk, you should vet each prospective employee and do a thorough background check. What did they do at their past employer? Were they fired, or did they quit? Why? Do they really have the skills they’re claiming to? Test them before hiring to ensure they can complete the job or at least talk you through the process.
8. Lack of Customers/Sales
Another common business risk is people not buying your product or using your service. Unfortunately, this is a reality for many businesses: over 60 percent of businesses fail before hitting the 10-year mark. The harsh reality is that some business owners and entrepreneurs think they have a good idea, but they haven’t validated their concept or taken consumer feedback into account.
If you want to minimize the risk of not having anyone purchase your product or service, do some outreach and gain insight into whether people are interested in your product or service. Does it solve a problem they have, and would they be willing to pay money for it? Research can go a long way and save you a ton of time and cash in the long-term.
9. Price Objections
For our final business risks, let’s discuss one we’ll all face (no matter what business you run): the dreaded price objection. Everyone wants a deal; no one wants to pay full price. But some things are worth more than the price you charge. That’s what you need to convey to your customers so they realize the true value they’re receiving through your product or service. Does your business solve a problem for them? Does it free up more of their time? Does it save them money? Will it increase their revenue? Quantify these things over the long term, and get them thinking about how much that’s worth to them.
Help your customers to understand why they need you and what it will mean for their bottom line. People love seeing cost savings, increased profits or other metrics over a period of time. If they will “make their money back” from doing business with you, your sales should be a slam dunk.