Entrepreneurship and small business ownership can be a very rewarding career for highly motivated individuals seeking to be the author of their own destiny. But it is not without its risks, and there are certainly small business challenges that you will be required to overcome on your journey to business success.
Many aspiring entrepreneurs dream of owning their own business, but the ones who succeed in turning their dream into their reality are the individuals who have the drive, discipline, and sheer will to succeed. Because the reality is that there are many threats in business and many small businesses fail within their first five years.
The misguided belief that only large businesses should conduct risk assessments and invest in reducing their risk via business insurance coverage can be a false assumption. All businesses can be at risk of failing, especially when trading conditions are tough, such as during an economic downturn.
This isn’t necessarily always due to mistakes or inadequacies on the part of the employees or the business owner, but rather it can be due to small oversights in terms of preventative actions. As such, protecting your business from unavoidable threats and risks is often a top priority for business owners.
With that in mind, let’s look at the common threats and business issues that small businesses can face and how small business owners can take a proactive approach to reducing the chance of each occurring in their business.
1. Business interruption
Are you sure that your business will be able to continue unabated in the event of a fire, a flood, or any other natural disaster that can impact your business? A business continuity plan that includes Business Interruption insurance can help you to get your business back up and running in the wake of a natural disaster.
To stay afloat following a natural disaster, it’s also important to have cash in reserve. Unplanned interruptions or disruptions could disrupt your cash flow and damage the reputation of your business. It’s important to have back-up plans in place in case the worst happens.
2. Bringing in new clients
One of the most common small business struggles that many small business owners face is sustaining their business over the long-term by bringing in new clients to grow the business. Some clients will invariably take their business elsewhere, and when they do business owners may need to respond to this challenge in a unique and creative way.
One common way to respond when clients leave your business can be to invest in strategic marketing activities that can help your business to reach, engage, and convert new prospects into paying customers.
3. Cash flow
While the old saying is ‘cash is king’, the reality is that cash flow is the one true king in small business. A stable cash flow is crucial for the success of any business. However, it can be hard to manage cash flow while balancing the need to meet the existing financial obligations of your small business, such as rent for office space and employee wages.
4. Time
A lack of time is often one of the biggest threats to small business owners and the long-term fate of their business. Small business owners are among the busiest people around. They are constantly juggling multiple demands on their time and there is rarely an easy solution to any problem.
However, small business owners may reduce the severity of this threat by prioritising the most important tasks and delegating the rest. You may also consider hiring an office manager to take some of the burden off of your shoulders.
Recommended reading: Time management tips for business owners
5. Productivity
While new technology solutions have made all of us more productive at work, small business owners may feel that it can still be difficult to increase their company’s output and achieve meaningful growth in their business. If that sounds like you, you may consider exploring options to further automate processes in your business and redirect your team members to focus their efforts on other areas of the business.
6. Profitability
It can be difficult to transition a business from its start-up phase to the point where it is achieving sustainable profits, especially for sole traders or micro businesses. This can be particularly true if you operate in a highly competitive market. If you are experiencing such challenges you may benefit from exploring the many ways that digital tools can help you automate certain business processes, operate more efficiently, and increase your profitability.
7. Losing key staff
As a small business owner, how would you respond if one of your long-term key staff members leaves your business? Senior staff members can leave your company for a variety of reasons, including a change in direction, maternity leave, for a career change, or for any number of other valid reasons.
However, try to take such situations in your stride and accept that staff won’t stay with your business forever. Instead of relying heavily on one or two key staff members, distribute responsibility across your team, including to both younger and older staff members.
8. Cyber threats
While cyber attacks on high profile Australian organisations in 2022 have put the focus on cyber liability risks, it’s important that small business owners accept that they too can be targeted by cyber criminals. And it’s important to note that a struggling business can still be targeted by cyber criminals.
While small business owners may assume that they aren’t attractive targets for cyber criminals, the fact is that all businesses can be targeted by cyber criminals. As such, a healthy respect for the risks and potential dangers cyber crime can pose to small business owners may be warranted. And alarmingly, more than 60 per cent of Australian SMEs never fully recover from a cyber attack or a data breach.
9. Injury to employees
In the early years of running your business, there will be many responsibilities that can draw your attention away from other important business owner tasks, such as the health and wellbeing of your employees. The long-term financial and operational consequences of an employee’s absence due to illness or injury can certainly impact the health of your business.
For small business owners, the long-term absence of a staff member may lead to financial and operational consequences. As such, business owners can benefit from having procedures in place to reduce this risk.
These could include pre- and post-accident procedures and flexible working options. These measures can make a difference when it comes to reducing the risk of injury to employees.
Business insurance made easy with BizCover
Have you got your business insurance sorted? At BizCover, we make purchasing business insurance quick, easy, paperwork-free, and drama-free. Our innovative online platform lets small business owners compare competitive business insurance quotes from leading insurers. Get your business insurance sorted in less than 10 minutes and get on with your day.
To learn more about how business insurance can reduce your risk, visit the BizCover website and compare competitive business insurance quotes, get covered in only 10 minutes, avoid paperwork, and get back to business. If you prefer to speak with us, you’ll reach our friendly team on 1300 920 867.
This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.
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ABN 68 127 707 975; AFSL 501769
