The Biggest Risks That Can Hit Small Businesses

Small businesses have a very special place in the world economy and provide some of the most rewarding experiences for consumers. From an operational perspective, they can be very stressful and draining. A lot of the time, they may lack the economic power, human capital, or knowledge to effectively run certain parts of their business as it needs to be scaled forward. Even with lacking these qualities, small businesses still face similar risks that large organizations face and can potentially be more vulnerable. All small businesses should be practicing some form of risk management for these top risks.

Financial Risks 

The biggest and most apparent risks that small businesses face are financial risks. Many small business owners and groups, invest large amounts of their savings or take out large loans to get their business off the ground. This results in a lot of do-or-die moments early on and immense pressure. Cash flow is a major concern early on and establishing as many avenues as possible without having all your eggs in one basket, which in this case is a single vendor or consumer. You must always consider where the money comes from to maintain daily and long-term operations that include payroll, marketing, supply chain, and so forth. 

Economic factors are an important thing to keep in mind as well. Whether your small business is red hot and doing well, an economic downturn can really strike fear into a business owner as well as a business entirely. It is important to have safety nets in a place like cash reserves and crisis management plans for when the world goes south and the market takes a hit. A market will always reset, but making it to the reset is key. 

Strategic Risks

As a small business, a few decision-makers may exist within the organization. The early-on vision of the company is important for the longevity of the business. In many cases, the organization may reflect a narrow vision due to the lack of decision-makers or a formal decision-making process. As the life cycle of a business continues, it is important that strategy is always reevaluated and goals are met. 

External factors surrounding your business need to be a priority as well. Many small business owners may believe that if they do everything a certain way that their strategy should always work. A shift in the external environment can throw a great strategy off track. This needs to be kept in mind while running a small business and shows how important it is to constantly revisit your strategy. 

Reputation Risks 

A great reputation can be a very strong asset. Reputation management is very important for the success of a small business. A bad reputation can turn away frequent customers and prevent new ones from giving your business a shot. Small businesses should always monitor discussion among their target market and respond to show their gratitude for them. Your brand and online conversations should help speak with unhappy customers and give them a “we are sorry but here is how we are going to make this better” kind of response to let customers know you care about their dollar votes. 

I hope this helps!