Starting and running your own company can be, quite literally, risky business. You’re investing your time, energy, hopes and dreams – not to mention hard-earned cash – in your idea and vision for the future.
Most entrepreneurs and business owners know that it’s risky territory – and choose to do it anyway. But that doesn’t mean throwing caution to the wind. Instead, it pays to know the key threats facing your business and take steps to avoid them. That way you have the peace of mind and headspace to focus on building your empire!
To help ensure you and your business are prepared for all eventualities, make of note of these top risks facing small businesses today, and what steps you can take to avoid them:
Cash flow: A lack of cash flow can be the death knell for any business, no matter how good your product or service. That’s why it’s crucial to stay on top of what’s going in and out on a monthly basis, as well as forecasting for the months ahead, to address any issues before they escalate. Also make sure you’re invoicing and chasing payments up promptly – it’s a pain but if you don’t, clients could start taking advantage.
Cyber-attacks and data breaches: These are among the biggest risks currently facing SMEs and the effects can be debilitating, leaving you unable to trade, damaging your systems and denting your reputation, particularly if customer data is involved. The Data Protection Act states that businesses have an obligation to keep client data safe, with significant fines for non-compliance. So make sure you’ve taken steps to protect your systems from attacks and are prepared to respond if the worst does happen. The Government’s Cyber Essentials Scheme is a good starting point.
Online reputational risk: With social media and user reviews at our fingertips, news (good and bad) travels fast. Just one social media mishap can damage your reputation, with social media #fails including defamation (e.g. slating your competitors), breach of confidentiality (e.g. releasing confidential information online), or just being generally insensitive. Effective handling of online complaints is also important, to avoid exacerbating any negative comments, particularly where others can read them. So to avoid getting into any sticky situations, implement company guidelines and approval processes for the use of social media, while making sure only trusted and trained employees are able to comment on behalf of your company.
Legal disputes: If your business offers a professional service, then you could also be at risk of legal issues, whereby a client tries to avoid paying your fees, or charges you with breach of contract if they’re not happy with your work. This can happen if there’s a dispute over what was agreed and what has been delivered, or if one of your team makes an error while carrying out a project – even if you’ve done nothing wrong, legal fees and reputational damage can be crippling. To minimise the risk, make sure you have contracts in place with customers and build in internal processes and checks to ensure you’re delivering your top work. Professional indemnity insurance (PI) is also a must-have to ensure your costs are covered if you do face a claim.
Intellectual property (IP): In a competitive business environment, if you don’t protect your ideas and product innovations, you could soon find somebody else has copied them – seriously frustrating, not to mention a huge threat to your market share! On the flip side, infringing on somebody else’s IP can also have serious repercussions, whether that’s using a business name, branding, photos or music without gaining permission first. So if you didn’t create it and you haven’t got a license for it, then you need to buy a license, or find another option.
Loss, theft or damage of business assets: Your gadgets and equipment are the fabric of your business, but what if something happens to that valuable technology? Most businesses would struggle to continue working with no PCs, smartphones or laptops, not to mention other specialist equipment you might need. With customers expecting fast, efficient service, just a few days of downtime can cause problems, plus the costs of replacing your belongings can quickly add up. So keep your belongings locked away when you’re not using them and make sure your stuff is covered by a contents insurance policy. That way if the worst does happen, you’ll be back on your feet quickly and with minimum impact to your business.
Nobody wants to think about things going wrong, but that’s often the problem – you’re in denial until it’s too late! But when it’s something as important as your business, cutting corners isn’t an option. So make sure you’ve got those pesky risks covered!
Ben Rose, Insurance Director and co-founder at Digital Risks