The history books are filled with stories of entrepreneurs and business owners who found success by adapting to change and taking calculated risks. In fact, most entrepreneurs will tell you that the road to success is fraught with risk. The path to get there is paved by your grit and determination. And, your roadmap is a good business plan that's risk-prepared and financially sound.
An entrepreneur, by definition, is someone who organizes, manages and assumes the risks of a business. Business owners, by nature, are not likely to be risk adverse. By assuming risks, an entrepreneur stands to reap the benefits. Running a business should not be about eliminating risk, but instead understanding what an acceptable level of risk to you and your business is.
Through knowledge, research, planning and support, a business owner can mitigate risks and turn challenges into opportunities. Here are ways you can better identify and mitigate risks to your business.
Create a business plan
Whether you’re starting up or growing, your business plan is your biggest asset. It helps you understand your direction, your industry, and, most importantly, your financial plan. As your business changes, so should your business plan. Build a business plan that will grow your business, not just in the day-to-day operations, but in the next year, three years and even five years as you evolve.
To do this, identify the risks and challenges that are unique to your business and industry. Include risk factors, such as events that could cause your company's revenues or profits to be lower than what you had forecast. Then, come up with scenarios and strategies to deal with them.
Often risks and challenges are different depending on the stage your company is in. Start-ups often have issues when it comes to obtaining loans or working capital, which can affect operations. Large established companies have other risks, such as high fixed costs from significant investments in staff, facilities and equipment.
Talk to an advisor. They can help you understand some of the risks that you might not be seeing, including the ones related to financing, cash flow, profits and liabilities. They can also advise you on Business Accounts, and how to best structure financing, pay off loans effectively, and forecast the growth of your business.
Whether you are speaking to an advisor or an investor, they will ask for your business plan, so be sure to create one. And, when it comes to creating your business plan - be realistic. There’s no point developing a business plan with unattainable goals. Know your strengths, your weaknesses, and what makes you unique.
Conduct market research and industry analysis
The better you understand your business and industry, the better equipped you are to approach the risks facing it. One of the most powerful strengths you can develop to help mitigate risk is knowledge. Successful entrepreneurs are constantly researching and understanding changes in their industry, keeping on top of anything new. You can start conducting market research by utilizing resources like:
- BC Stats: They have the largest collection of BC-based stats and reports. Here you can access the most recent Small Business Profile that features detailed information about business growth by industry, fastest growing sectors, and more.
- Statistics Canada: They have a wide range of information on economic and social conditions in Canada, including data on the economic impacts of COVID-19.
- CivicInfo BC: They offer a comprehensive list of custom reports from annual local surveys from towns, cities, and regional districts across British Columbia.
- BIAs and Chambers: If you’re a member, your BIA or Chamber of Commerce should have statistics of the business area you operate in, such as population, dominant age range of residents, education, occupation, income and spending behaviors of residents, average real estate and lease rates and more.
Also, research individual businesses in your industry. Examine annual reports that could be publicly available on your competitor's website. If they are a public company, they will have this. Learn about their previous performance and benchmark your performance up against theirs. You can also read about business risk through case studies and educate yourself on the ongoing changes of any industry you’re involved with or operating in. Becoming a member of an industry association, chamber of commerce or BIA is a great way to gain access to these resources.
By constantly conducting market research, you’ll find yourself with a deeper understanding of the landscape, which allows you to test and take more risks, rather than blindly hedging your bets. What you don’t know, be sure to find out. Purchase business insurance When you think about risk, you should think about internal and external factors that might affect your business performance or ability to do business. Can your business survive if you or other key employees are unable to work due to injury or illness? What happens if one of your locations or warehouses catches fire? You worked hard to grow your business so protect what you’ve built - insurance solutions can help cover your business expenses, as well as protect the people who drive your success.
Discuss your options with a professional to find out what is most suitable to you personally, your business, and your assets. With the future in mind, you may also want to inquire about life insurance and health insurance, in order to protect your family.
Turning risk into business reward When you begin mitigating risk, you start removing barriers that enable you to turn challenges into opportunities. Life as an entrepreneur will constantly be faced with risks. You can be sure you are making calculated risks by being armed with knowledge, planning, flexibility and support.
If we aren’t already, let us become part of your support network that you lean on for advice. Talk to an advisor.
Expand your knowledge
Gain insight on how to create a business plan, increase sales, improve customer service and more. Here are some other helpful articles to lean on for insight: