When you start a new business, there’s lots to consider. It can be easy to get carried away with your plans and forget about the risks.
And it’s always harder to make yourself think about the downsides and potential problems. So here’s a checklist of the key new business risks to take into account.
1. Financial risk
Money is first on anyone’s list when starting a new business – and also presents the biggest risks.
Here are some of the financial risks you need to avoid: being unable to pay back start-up loans, taking out too much debt to start off with, and facing cashflow problems.
In some businesses, it can take time before you begin to see a return. You need to plan carefully for this.
Other financial risk factors include non-payment from customers, running out of credit with suppliers, holding too much stock (especially perishable goods), sudden price rises in raw materials, or overpaying for equipment.
Give careful thought to all areas where your new business might be exposed to financial risk.
2. Strategic risk
Your new business can go off track quickly if it does not have a clear strategic direction.
It can be easy to try to do too much too soon, or to become distracted by fresh opportunities. It’s important to plan carefully and clearly, and stick to the programme.
Get help to prepare your business plan and talk it through with experienced people who can mentor you and give sound advice. Your marketing strategy is part of this, including your social media and communications plans, which must include dealing with reputation risk: planning for crisis and for when things go wrong.
Understand your brand, and your customers, and protect them by monitoring carefully. Are you prepared for fluctuations in the market, or bigger economic factors such as a recession?
3. Supply chain disruption
If you buy in goods, and ship them to customers, supply chain disruption is a continuous risk.
Consider how much you rely on other businesses to provide your products, especially if you are dependent on one source. Do you have any alternatives in place? Make sure you meet and know your suppliers and be sure that they in turn understand their risks and contingency plans.
Do they, and you, have plans for alternative shipping routes and for coping with times of peak demand and seasonal fluctuations? What about cyber risk – how can you prevent online disruptions and serious breaches?
This is a broad term for making sure that your new business activities comply with laws and regulations. There are many areas that fall under this heading, including ensuring that your employees and stakeholders are safe, that your business is legal and that it complies with competition law.
If you are employing people there are many aspects of employment law to consider. They must receive the correct training – make sure you do, too. And there are many intangible areas such as copyright and GDPR.
Not forgetting the really important financial ones such as tax and VAT.
A few other examples include insurance. Public liability or professional indemnity insurance can be compulsory.
Check environmental legislation. Are your vehicles and equipment fully licensed? Find out the rules that apply to all areas of your new business.
5. Don’t go it alone – ask for advice!
As you can see, there’s a lot to think about when it comes to new business risks. We’ve only given an outline here.
The best way to minimise the risks that your new business is exposed to is to seek advice. From trusted professionals, experienced peers, and from mentors and advisors in all areas – OxLEP Business can give you all the necessary support you need to face these challenges.
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