3 Tips for Protecting Your Business from the Unexpected

Posted: March 24th, 2014 | Author: Dan Zimanski

Let’s face it, there’s not much you can do to control the outside forces that might disrupt even the best laid plans.  And sometimes, the unthinkable actually does happen.

It is nearly impossible to predict if or when a key client may close an account, a supplier will become unavailable or raise their prices, or other negative things will happen.

While we can’t always anticipate these types of events, what you CAN do is change how prepared you are for when the unexpected happens.

Keys to Making Your Business Less Vulnerable

There are many small businesses that are unable to stay afloat because one unexpected hit is enough to take them down. If this happens, it means that the business did not have the necessary cushions and safety nets in place to safeguard against these types of occurrences.

The key is to take actions now to ensure that your business is less vulnerable when it comes to the unexpected. Even if you are a brand new business, and do not have a large amount of resources, there are still steps that you can take to protect your business.

Tip #1 – Avoid Unnecessary Risks

This may seem very obvious, but new businesses make the mistake of being too trustworthy all the time. To attract new sales, businesses will sometimes extend credit to customers who are not credit-worthy. Especially when your business is just starting, you cannot afford to extend this much trust, even for small transactions.

CBS News recently reported that completing an order, and then not receiving payment, is approximately twice as costly as having no transaction at all. If you work in an industry in which it would be unreasonable to ask for full payment upfront, there are ways that you can protect yourself from risky buyers.

First, you can require credit or reference checks. If the results are in any way questionable, you should forego the transaction. Other possible solutions include:

  • Requiring a down payment
  • Not completing the service or providing the entire package until payment is received
  • Receiving a pre-authorization for a credit card payment, but not processing the payment until after the goods and/or services have been delivered
  • Offering discounts for clients who pay upfront or early

Always be polite, but clear, about your payment requirements.

Tip #2 – Diversify Your Business

Diversity is essential when reducing the vulnerability of your business. It can be very dangerous for a large portion of your revenue to come from a single client, a group of clients, or a particular type of transaction. If an unexpected change wipes out this revenue source, it could mean the end of your business.

For example, if the majority of your revenue comes from the sale of one specific product, and that product stops being profitable or even viable, your business is going to be in a world of trouble. Even if you specialize in producing a product, you should look for ways to offer different versions of that product, and additional products and services to accompany it. If something happens to stop the sale of one product, you will have the others to keep your business running.

Tip #3 – Continually Track & Measure

It is possible to reduce the number of unexpected problems that occur when you have a strong business plan in place and you track and measure your progress regularly.

It is not enough to simply have a plan when you are launching your business, and never look at it again. When you track how well your strategy is working, you can identify strengths and weaknesses and adapt your plan for the future. You can also incorporate contingency plans that can be followed in the event of a problem. A business that is prepared and aware will be ready for anything.

 

Source:

http://www.cbsnews.com/news/how-to-protect-your-business-before-things-go-wrong/