Risk is part of the Business
Risk is part of the Business Administration - which comes with the territory. For small business owners, and there are many things that avoid risks: product development, manufacturing, and selling them for profit in these operations and management of growth. In addition, if the employer is a sole proprietor, face additional risk of personal liability and financial risks. Carrying the right risks, however, you can accelerate your business growth. Here are seven strategies that help reduce their financial risk so you can re-run business.
1. Plan and potential risks
Every business needs to plan for the future of the difficulties in the future, whether anticipated or not. Smart business owners create an inventory of all the risks before and after evaluating the company can afford and management. Can this also requires some planning scenario - a tool developed years ago by Shell. Develop contingency plans and safety margins are considered best practices for risk management.
2. Keep a lid on debt
And having a business that relies heavily on debt, both short and long term, is risky. With a fixed cost pressures, which leaves the work vulnerable to increases in interest rates. If you have debt management. Debt refinancing variable rate debt with fixed rate, which guarantees future payments to your lender are more predictable. Instead, converting debt into shares, giving investors a slice of the company in exchange for money.
3. insurance against specific risks
It is important to know the faces of the business and specific risk guaranteed against them. A retail store, for example, must ensure that inventory. This is what you need insurance for fires, storms, equipment failures, liability, personal injury and property damage?
4. Focus on Cash
The benefit is what they say accountants, but cash is king. Sales contribute to the accounting profit, but cash flow tells the true story. If the cash flow delay cash payments, the company is experiencing short-term cash and short call. In the worst cases, it can make a profit and go out of business. Cash flow analysis runs this risk. Takes on variables such as accounts payable, accounts receivable and costs and inventory and work in progress. The establishment of monetary expectations. Diagnosis should tell you that you are paying, when payment must be made, and that is paying you and when it comes in. Sets expectations also all the costs for the month. Good forecast model can anticipate the risks so that they can take the necessary steps to avoid them. It can be used to develop assumptions about sales and costs, credit and financing to produce a monthly cash flow projections well before and assess the impact of the cash flows from future sales, costs and conditions of the credit and the replacement of assets, such as office equipment and vehicles.
5. The existence of a plan of action
Action plans necessary for risk management - not the owner of a small business can not afford to have one. Needless plan through each step with a fine tooth comb so you can get a better idea of when and where most of the risks and how they can go about their management.
6. Conduct market study
To anticipate the risks and analyze all directions, whether the market's current and future plans to sell. Search your target audience. With this information, then you can work in the manner that will meet your needs. Also, look for companies or products that were not successful, and the like. Now we plan how you will stand out.
7. Do not put all your eggs in one basket
To limit the financial risks, stick to the head of the conservative capital structure and diversify. Note that more money is spent on one thing, the greater the risk it represents. This is true even if it indicates all your research because it is a safe bet. Diversify risk and diversification. If the risk is not worth on a particular project, at least you have some backup plans.