Do you know the threats to your business?
Preparing your business to succeed when faced with adversity is essential for the longevity of your business. Every business has risks, even large successful businesses could suddenly suffer a catastrophic drop in sales or a cash flow issue that forces closure. By identifying your business’ weak points and deciding how you would deal with a problem in advance, you’re not planning for failure, you’re thinking ahead to solve potential problems. That means your business, while not completely disaster proof, is certainly in safer hands than one whose owner refuses to accept the idea that things can go wrong.
Identify your business’ weak points and decide how to deal with them in advance, don’t allow failure to be an option.
How can you be ready for threats to your business?
You can create a plan of action in case certain events occur. For example, losing your largest client might be a disaster but not if you’ve thought ahead about what you’d do if it happened. You might be ready to quickly approach other potential clients, or have begun to diversify your client base.
This practice allows you to envisage the obstacle and also have a plan in place for dealing with it. It’s called implementation intention and you can read more about the psychology of it here2. Implementation intention stops panic, forces you to confront the risks facing your business and can be very successful in pulling businesses through tough times.
Planning for potential risks and problems that may arise and threaten the success of your business ensures you feel prepared and have an action plan. With the feeling of being prepared, comes a calm mind that is ready to act. Your plan should include regular review points including a review of your key business success measures. This allows you to see when you might be heading for trouble before it’s too late.
What threatens my business
David Worrell writing for Allbusiness, says business risk centres around six common issues4.
Risk – Potential problems5
Product – Can’t be made, is too expensive to produce or has quality issues
Technology – Systems can’t support business, obsolescence of your product
Market – What seemed like a good market isn’t, demand too low
People – Can’t hire or keep the right employees, skills not up to scratch
Competition – A competing product or service wins the fight for supremacy
Finance – Poor management or mismanagement of funds, no access to funds
Every business should, in their business plan, have methods already set up to respond if these issues arise. Beyond these potential disasters are other, less obvious risks that you should also consider as a risk to your business and therefore part of your ‘plan to fail’.
Risk – Questions to ask yourself
Government Regulation – Can your business survive changes to tax law?
Supplier risk – Is your main product dependent on just one supplier?
Customer risk – Is your business dependent on too few customers?
Natural disaster – Can your business survive a natural disaster?
Technology – Can your business recover from a technical outage or an IT disaster?
One of the main risks a business faces is data recovery. Most businesses these days are heavily reliant on computers and software to run their business. Whether it’s a desktop computer, laptop, tablet or a cloud based server your ability to do business is reliant on these systems. The data gathered on these devices is the essence of your business, client details, plans, quotes, proposals and everything in between can be lost in a moment.
This is one area of risk that can be foreseen so ensure you have a reliable data recovery system/plan. You should be able to recover your system and data quickly and with minimal or no loss of data in the event there is an outage of issue with the system.
Only you can establish what obstacles lie in wait for your business. Taking a step back from day to day operations will give perspective and help you discover threats to your continued success. Once you’ve worked out where the potential problems are, you can plan to counteract them. They may never arise, but you’ll be ready if they do.
Prepare for the bumps in the road
Of course, not all these risks will threaten every business in the same way. This is where you and your knowledge of your unique business are required. Or perhaps a business adviser who can look at your situation and help you create your action plan with you. A clearheaded, objective view of what threatens your business and a plan of attack to counter any problems is what will prepare you for the tough times and, we hope, get you through them.
If you’d like some help contact us at Modoras to discuss how one of our Business Advisory Specialists can assist. Helping businesses stay strong during tough times is one of our specialties. Call 1300 888 803.
A clearheaded view of your business’ threats and a plan of attack to counter any problems will prepare you for the tough times.
Over to you
Have you assessed the risks in your business? Are you prepared if they arise? Let us know in the comments.
Want to know more?
- The psychology of implementation intention
- allBusiness: David Worrell–Plan to fail-successful business planning starts with failure
- com: Stever Robbins, Dec 2004–Business plan risks
This article is published by Modoras Accounting (UMG) Pty Ltd ABN 81 601 145 215. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.