The way you manage small business risk can make or break your company. You’ll never know when an economic downturn occurs. You can only prepare and hope to eliminate or at least mitigate risks by implementing the right management strategies.
There are internal risks you can control like expanding too fast and too soon, over investing in a non-profitable project, lack of market research and others. There are also external risks you have no control over such as changing policies and politics, rising or decreasing interest rates, and weather that may affect the supply chain or deliveries.
These are risk management strategies for small business owners you can implement.
Learn to Prioritize
Create a list of risks that you need to prioritize. You can mark them as most likely to occur, likely to occur, unlikely to occur, or very unlikely to occur. These tiers allow you to prioritize which one needs a solution first. If you can’t completely solve it, identify ways that can mitigate its negative effects. You might want to consider using financial ratios to assess your company’s profitability and identify possible challenges.
Some small businesses make the mistake of expanding too soon and too quickly. This straps their cash flow and leads to both short and long-term financial problems. Set sales goals that focus on quality instead of quality. This allows you to address customer needs and pain points. It also enables you to provide better customer service when the need arises.
Invest in innovations that simplify some of your team’s staff. However, avoid adopting new technology just because it’s trending. Have a definite reason for using it. Only enter a new market after thorough research and if it is profitable to do so.
Customer perception affects sales and your company’s reputation. Make it a point to deliver quality service and products. Asses and test products before selling them in your stores. Create and implement a consistent quality assurance program to prevent expired, damaged or used items reaching your stores.
Reduce the Number of High Risk Clients
One of the ways to mitigate small business risk is to limit high-risk clients. These are customers that have a poor credit score. Review the credit score of customers and if they have a low one, implement stringent rules and penalties for late payments. It is better to attract customers that pay on time.
These practices allow you to manage risks effectively. Doing so enables you to improve cash flow, identify company strengths and weaknesses, and find ways to generate revenue. If you need help with bookkeeping, you can contact us here at Robookkeeper through [email protected]. You can also review our virtual bookkeeping services.