If you have decided, “I want to buy a business”, then it is important that you first understand the risks that are involved. While there are thousands of businesses that are started each year, it has been reported that 45% of businesses don’t survive beyond 5 years. You may have a solid business plan in place, but there are times when unforeseen circumstances can affect your projects and can, unfortunately, negatively impact your bottom line.
There are a wide variety of risks involved in a business, from the competition to the environment. Fortunately, there are some common ones that businesses have been exposed to over the years. If you can become familiar with this and include a proactive approach in your business, you will help reduce the risk of setbacks in the future.
There are both internal, and external environmental risks that your business could fall prey to. Unfortunately, environmental risks cannot often be predicted. These may be things such as adverse weather conditions that affect the opening of your business, the supply chain, or your employee’s wellbeing. To a certain extent, you can control where you choose to locate your business, and which stakeholders you choose to work with. Internal environmental conditions include the practices of your business and how they impact your employees, customers and the environment.
If your business model is reliant on money that is not received until after a good or service has been provided, you pose a large financial risk. This is particularly common when there are physical products involved in the supply chain as there is a much greater risk of delays and issues with payments, and in some cases, action has to be taken against the debtor which can cost further money and resources to complete.
Starting a business can be great fun, but there is another side of it that you have to be aware of, and that is compliance. The rules around compliance will be different for every business, depending on what country or state you start and register your business in, and whether you trade internationally or not. Some of the most common compliance problems come from the smallest mistakes, such as wrong tax information submitted at the end of the year, not providing all the information upon registration, or not following data privacy and protection laws with customer information. Consequences for not being compliant is one of the biggest known costs that companies incur.
The opinion of your customers is key to your business success, without it, poses a huge risk to your business stability. With the rise in social media, consumer opinions, especially negative ones, can spread like quick-fire and instantly tarnish your company, and therefore, your revenue. A bad reputation is particularly hard to come back from, especially as all industries are extremely competitive, so customers can quickly move onto another brand on the market.
It is important at any stage of business, that you take a proactive approach to the risks that you may be exposed to.