Why did small businesses go bankrupt in this downturn? They didn’t plan for catastrophe and they failed to keep good financial records. Here’s a guide to the risks your business should consider and prepare for in order to thrive no matter what, according to Entrepreneur.com
Whenever there’s an economic downturn, many small businesses go bust. Why? Because they didn’t plan for the crash.
The name of the game is risk mitigation. Big global companies engage in enterprise risk management, examining every type of risk in their planning and devising strategies for surviving the worst-case scenario. Small business owners can learn a lot from the process.
Some of the factors to look at include:
Internal company risk: Employees who embezzle or that important sales manager who leaves suddenly
Key man risk: The business revolves around a “key man’s” personal relationships with clients, and this person could leave the company or die
Currency risk: The dollar weakens or strengthens in relation to other currencies, impacting an import or export business
Supply-chain risk: Vendors go bust, goods fall off a shipping barge, or the price of gas shoots up
Facilities risk: A fire or theft at your store, office or warehouse
Acts of God: Floods, earthquakes, damage from hail
Civil unrest: Everything from Occupy Protests blocking access to your storefront to government overthrow to full-scale war
Once each risk is identified, business owners need to run what-if scenarios.
Do you have enough money saved? A disaster plan for how your business would run if your home base was destroyed or your electricity went out for weeks? Are you properly insured? Do you have safeguards in place to prevent employee theft?
Four years into this downturn, there probably isn’t a small business owner around who isn’t aware that things can go wrong. But do you have a plan for what you’d do if business got worse? Now’s the time to prepare for the next curveball life will throw at your business.
