Small businesses are unique in many ways. They do not have the extensive resources or knowledge-base that large organizations may have. Because of this, while small businesses may face similar risks to their larger counterparts, they may be more vulnerable and thus should employ more careful mitigation strategies.
At Sustainable Business Consulting, we support businesses to manage organization risks and align their business strategy to respond to these risks ensuring business sustainability.
Here are the six major risks to small businesses and what you can do about them:
Financial risk
Cash flow is one of the biggest concern for SGBs
The biggest risks facing many small organizations are actually financial. Founders often have invested their life savings or taken out significant loans in order to get the organization off the ground, so there is a lot of pressure to be successful.
Cash is one of the biggest concern. You must consider where money will come from to maintain operations, pay employees, and invest in market penetration and growth.
Depending on the industry, you may have to make a large upfront investment and it can take a while to begin seeing a return. Careful preparation and planning, as well as support from third parties, can help you mitigate this risk.
Economic conditions are also an important factor to keep in mind. A serious recession of the economy can damage even the most wealthy of organizations and are more than able to put a small organization out of business.
You must consider the current and future environment and prepare the organization. This process is usually best when it takes place during prosperous times: it allows you to save excess cash to prepare adequately.
Strategic risk
The shifting external environment presents a major risk for all organizations
Most SGBs do not have formalized decision-making processes in place, and each stage of the business life cycle comes with its own challenges. The shifting external environment is also a risk for all organizations. Competitors may appear or change and begin offering a similar product or service. Technology can shift, presenting a new opportunity or rendering a current process obsolete. New regulations may force you to change the way you operate. To address this risk, you must simply prepare for it through research and business continuity planning.
Bring a diverse group of your staff together ,brainstorm a list of risks and prioritize them, then ask what you are doing to mitigate each risk and what you should be doing. Conduct research based on industry trends, your competitors, and prior experience.
Constantly work towards improvement by coming back to the list at least annually to ensure you are on track and that the list is current and accurate.
A company’s reputation is its single, most important asset.
Reputation risk is one of the most commonly overlooked risks. A company’s reputation is its single, most important asset. This is particularly important for small businesses because they need to create a good reputation in order to grow: if nobody has heard of your organization or only knows bad things about it, they’re not likely to become a customer.
With the ever increasing use of social media and technology, it has become both easier and harder to manage your reputation. It’s harder because every customer has a public forum an audience that they can go to if they are not happy with your organization; but these conversations are no longer happening behind closed doors and be addressed publicly to maintain your image.
It is not enough to simply sign up for a Twitter account or create a Facebook Page; business owners should monitor online conversations about their brand and participate.
Encourage feedback, both positive and negative, and always show gratitude and empathy in responding. While responding to negative views can be difficult, it’s crucial to maintaining reputation.
In addition, every organization should have a social media policy, defining how employees should interact with customers and portray the company, both on organizational and personal pages. This ensures that your employees are aware of how their social media use can have both positive and negative impact on the company.
Working in a safe environment leads to employees’ job satisfaction, increased job value, contentment, and reduced absenteeism, punctuality, and low turnover rate
SGB owners and their staff often work side by side in pursuit of a common goal: the company’s economic survival. As a result, health and safety is seen as personal responsibility with compliance been viewed as an additional pressure on already overworked business owners.
SGBs are characterized by higher rates of accidents and ill health with accidents reported to be 20 per cent more frequent in small enterprises than in enterprises of more than 100 workers.
Because cash flows in SMEs tend to be tight and they find it harder to release staff than larger companies, occupational safety and health is often a low priority. This is despite the evidence that safe, healthy and agreeable working conditions not only save days lost through sickness and injury, but increase productivity.
For small businesses, establishing a health & safety system early is essential especially if your business is involved in any high-risk activity. Working in a safe environment leads to employees’ job satisfaction, increased job value, contentment, and reduced absenteeism, punctuality, and low turnover rate
Outsourcing health and safety assistance can be a cost-effective way of aiding compliance and ensuring safety of employees. We recently undertook a diagnostic of OHS in East Africa among small and growing business in various sector.
Get in touch with us at info@sbclimited to get more details. Let us support you business in identifying, mitigating and managing business risks.
Contact Form