Starting a business is risky; you are stepping into the unknown and putting a lot on the line – your finances, your mental health and your family relationships. The rewards can come though, and one thing is sure, when you run a business the sky’s the limit. It will take a lot of hard work and perseverance but if things go right, then it can change your life.

Identify the risks

To manage risk, it is important to first identify it. The best method to do this is to carry out a risk assessment on your new business. This is a simple exercise to highlight what risks you could be facing and to set out what you could do about them.

Grab a piece of A4 paper and write these headings on it:

Risk What could go wrong How to mitigate it Action
       

 

Risk

In this column, list out all the risks you could envisage going wrong in the business. Use your imagination and go though every risk you can possibly imagine, no matter how large or small.

Here are a few examples:

  • Computer break downs
  • Fire
  • Employee theft
  • Customer injury

What could go wrong?

Now go through and elaborate on each of the risks – give more detail on how it could go wrong, why is this a problem and what effect it could have.

How to mitigate it

Identify what you could do to prevent the risk being a problem – what could you put in place to stop the risk being a major concern?

Actions

This should be a bullet point list of actions, based on the detail in the previous columns.

Example:

Risk What could go wrong How to mitigate it Action
Computer breaks Loss of important data such as customer orders, customer info, etc Regular computer back-ups, up to date virus software, PAT testing ·     Arrange Virus Protections

·     Arrange Pat Testing

Once you have done this, you will have a complete action plan on how to mitigate your risks.

Ten action areas to allow you to mitigate risks:

  1. Insurance – get some for your employees, for the general public, for your vehicles etc. You need this by law, but it also gives you peace of mind that you are covered in the event of disaster.
  2. Back up data – use an off-site back provider and back up regularly. Test the back up to make sure it’s working.
  3. Do not allow anyone else to be a signatory on your bank – this decreases the risk of anyone stealing from you.
  4. Get a good accountant to reduce the risk of an HMRC tax investigation and help you avoid late penalties.
  5. Use Xero and allow your accountant to access it – they can keep an eye on your finances to make sure your business is viable.
  6. Produce a cashflow forecast and keep it up to date.
  7. Set up good quality procedures before you deliver products – if you regularly check your products or the service you deliver, you will avoid customer complaints.
  8. Choose your customers carefully – the wrong customers can cause you more harm than good. Evaluate them, check their credit rating and go with your gut.
  9. Control your growth – growing too quickly can lead to lack of control and can cause you all sorts of issues. Make sure you have enough resource
  10. s to complete the work you have coming in. Don’t be afraid to spend some money.
  11. Keep an eye on your competitors and adapt to changes they make – if you fail to do so, you risk them taking away your customers.

Risk is an inherent part of life and business – what you do to mitigate it may mean the difference between survival and failure. Contact us if you want to discuss your new business.