How do you move your business forward? A booming economy needs its fair share of risk-takers, as taking risks drives innovation and growth – as long as your risk is calculated. Here are 6 tips to navigate unfamiliar routes.
1. Distribute your risks
When you count on one major deal to come through in order to secure your cash flow, your company could run into rough weather when it ultimately doesn’t. Spreading your risk is essential to good entrepreneurship. It goes without saying that this applies to both customers and suppliers. If your total turnover relies on 5 customers who each account for 20 percent of the total, you don’t have much leeway. One nonpayer could put your entire cashflow at risk. It’s a similar situation if your company’s smooth functioning depends on just one crucial supplier. Its failure to deliver for whatever reason could compromise your business continuity. What’s more, a relationship based on dependency hinders your flexibility to negotiate the best prices.
2. Don’t waste your human capital
A good entrepreneur doesn’t solely invest in products, but in people as well. Hiring and training qualified staff is expensive, and even moreso during the initial period of trial and error. Don’t hesitate to identify room for improvement when it comes to newly hired personnel. Allow them sufficient time to grow, but don’t tolerate unproductivity. A smooth onboarding and careful guidance are key.
3. Find your allies
When it comes to business partnerships, do you know who you are dealing with? Smaller B2C companies may not always have the luxury to be overly selective in their customers, but there is no harm in healthy suspicion. Particularly in a B2B context, the detailed screening of potential new customers is common sense. Their financial track records for example, could reveal a need for tighter payment periods or stricter contractual clauses. The same goes for new suppliers: don’t be afraid to set the bar high.
4. Keep a close eye on your market
Whether your company is domestically oriented or aimed at international outlets, make sure you monitor your markets closely. Various external factors such as exchange rate fluctuations, changes in local regulations, armed conflicts, natural disasters, etc. could all effect the actions of your customers and suppliers. The sooner you are aware of the events, the better your position to intervene. But don’t be misled by geographical borders. In today’s globalized economy, any change in the international market could have a possible impact on your business. Are you ready to tackle Brexit or a possibletrade war between China and the United States? Better come prepared!
5. Don’t be afraid to innovate
Companies who do not innovate on time may soon find themselves forced out of the market as a result. Think of Uber or Airbnb, who have been taking the taxi and hotel sectors by storm. Whether in terms of new markets or new technologies, competitors are lurking around every corner and you can expect them to do whatever it takes to secure their futures. Naturally, innovation comes with risk, but there’s an even greater one in not doing so. Standing still while others move ahead will put you at a disadvantage.
6. Prepare for the best, but plan for the worst
Every company is faced with certain risks. Whether these risks are internal or external, small or large, anticipated or unexpected, avoiding risks altogether is an impossible job. However, it is sensible to prepare in order to minimize their impact. A risk policy will help you to do just that. Ask yourself the right questions and provide the right measures, either to prevent certain risks from taking place or to mitigate the consequences of a failure. Remember to update your risk analysis on a continuous basis, as risks are constantly evolving.
Grow your business safely
Protecting your company has never been so important than now. You are never safe from the default of payment or the insolvency of one of your customers. Very often bad payments and insolvencies lead to a snowball effect. This creates risks for the cash flow and profitability of your business. A large unpaid invoice can jeopardise the growth of your business or eventually lead you to insolvency.