Every single day business owners are rolling the dice on their survival in business… Are you one of them?
Today I want to bridge a topic that most business owners choose to ignore either by choice or ignorance.
While I agree being optimistic and a glass half full type of person is an advantage in business, ignoring what could go wrong is a guaranteed path to future pain and possible bankruptcy.
The attitude of I will deal with it when it happens is not good enough as you can lose it all ever so quickly.
Why would you work so hard to build something only to let it be taken from you so easily???
2 things are abundantly clear to me.
➡️ 1) Most business owners have no clue how to identify or deal with risk.
➡️ 2) The business owners who I see as successful and have been in business a long time address and manage risk.
They put time and attention is to addressing what could go wrong.
It’s one thing to create a successful business, it’s another to keep it!
The good news is that it’s often not that hard to deal with risk if you know how. (i’ll get to that later)
Let’s take a look at the main types of risk I see and you need to be aware of.
➡️ Concentration risk
When a business has a single group exposure.
If this single source was to fail it would have a big impact on the business
More than 25% of revenue comes from one source
Everything in a business relies on the business owner.
One supplier provides all the stock to a company
➡️ Obsoletion risk
When a new technology or way of doing business change,
A great example of this is Kodak or Blockbuster.
Technology changed these companies in a big way.
Failure to acknowledge new technology lead to their demise.
➡️ Keyman risk
When a business relies on a person and without that person, the business would fail.
This is often the business owner
Example: A key person in the business leaves and no one else in the company can do what this person does.
➡️ Financial risk
No cash reserves.
The game isn’t over when you run out profit.
The game is over when you run out of cash.
In a time of crisis, cash solves many problems.
It’s very hard to pay bills with the “profit” that has not been turned into cash.
I know many business owners who run “profitable” businesses who struggle to pay their bills due to lack of cash.
Example: Businesses who run a negative cash flow cycle (like real estate).
A business owner can work for months to make a sale only to run out of cash before settlement.
➡️ Platform risk:
When a business relies on a platform they do not own for their business to existing.
Facebook and Google.
Many modern businesses rely on these platforms.
If they disappeared overnight so would their business.
These “platforms” have become so integral to many businesses.
It’s not them disappearing that really concerns me on this one.
They are already very well known for changing rapidly and without warning.
What makes you think your business is safe on these platforms?
➡️ End of part 1
Take note if any of the above types of risks apply to your business.
In part 2 I’ll explain how to deal with risk
Hit like on this post if you have some risk that needs some attention.
If you comment and share the type of risk i might even help you put something in place 😉