Running small firms day to day can leave little time to think about anything but the most immediate and pressing concerns. But neglecting other risks can have serious consequences for the future of the business and sometimes jeopardise a firm's chance of survival. Here are five issues which might not be at the forefront of a small business owner's mind but should be.
1. Cyber attacks
We’ve seen the plethora of cyber attack headlines and the financial damage done to the likes of TalkTalk and Ashley Madison after hackings. But it’s not just big businesses targeted. Ronnie Tokazowski, senior researcher at PhishMe, says, ‘Often hackers will go for the low-hanging fruit as they don’t necessarily have the budget to penetrate the firewalls at a company that has a five figure security budget.’
Not having the financial clout of a FTSE 100 company doesn’t mean you’re doomed to fall victim though. ‘Show employees sample phishing emails,’ advises Chris Underhill, CSP’s head of IT and security. ‘Run simulated attacks on your own business to address potential weaknesses.’ Getting into the habit of regularly backing up data is also an effective way to giving hackers less leverage if you do end up targeted. ‘It stops hackers extorting the business and holding the network to ransom,’ Tokazowski adds.
It’s worth getting an incident response plan ready to go should your firm get hacked. ‘A good plan should follow a four step process of assessment, containment, recovery and improvement,’ Underhill says.
2. Reputational risk
There are plenty of examples of big businesses handing a scandal or tragedy rather badly (see Thomas Cook). But it should also be a concern for small firms. As Jackie Maguire, CEO of Coller IP warns, ‘a company’s name and reputation are closely entwined’ and once damage is done it can be hard to patch it up. Often when the fault lies with a firm, the best approach is to be upfront, sincere and admit where your responsibility lies.
Something like a cyber attack can also come with a reputational cost. Yet the government’s Cyber Streetwise report with KPMG found only 29% of 1,000 small firms surveyed thought potential reputational damage from a cyber attack was an important consideration.
Of those which had experienced a breach, 89% said it impacted on their reputation (including brand damage, loss of clients and a struggle to win new business). George Quigley, a partner in KPMG’s cyber security practice, says, ‘It’s vital to take steps to protect your data and with it the trust of your customers and ultimately your reputation.’
3. Cash flow conundrums
Bobby Kalar, founder of energy supplier Yü Energy, says that, ‘once we received our energy licence, cash flow quickly became my biggest worry’.
‘Securing the cash you’re owed can be difficult,’ FreeAgent’s chief accountant Emily Coltman, adds. ‘Sometimes clients forget to pay on time – or even flat-out refuse to pay – and it can be stressful to chase them.’ It’s important to agree a contract with your client before starting work.
And don’t dawdle when it comes to sending an invoice – do it as soon as the project is complete so it’ll be fresh in your client’s mind. ‘Wait too long and there’s a chance they’ll not immediately remember what work you completed and will prioritise other invoices,’ Coltman says.
Lucy Burnford, who launched motoring platform Motoriety.co.uk, notes that cash flow troubles can plague small firms at numerous stages. While her business attracted investment offers in the early days, ‘the process actually took a huge amount of time, which meant cash flow challenges’.
Often the blame ‘lies with poor decision-making and planning, rather than the company’s inability to handle cash flow issues,’ according to Sean Mallon, CEO of online business selling platform Bisdaq. A well-thought-out business plan can go a long way.
4. Failing to plan for the future
It can be a struggle to think ahead to the end of a week, let alone years in the future, but neglecting to do so can be a serious risk to your firm’s prospects.
If a business is likely to have the same individual at the helm for years, ‘a properly thought out and documented succession plan’ is crucial, says Christian Mancier, corporate and commercial partner at Gorvins Solicitors. That includes considering both the business side of affairs and a last will, testament and inheritance tax position of the individuals involved.
‘These problems can take an eternity to sort out and often involve lengthy, costly and emotional legal proceedings,’ Mancier warns. ‘Whilst these are going on the business usually suffers, sometimes to the point of insolvency where there is nothing left to fight over.’
5. Loss of intangible assets
Something that often gets overlooked and causes all manner of problems down the line is the loss of intangible assets (everything from trademarks to patents to trade secrets). Maguire says businesses need to think about this right from the outset. ‘Or there is a real risk these assets – typically forming around 80% of the value of a business – may be stolen,’ she says. By then of course, it’s often too late to do anything.
There’s more to consider if you’re thinking of trading internationally. ‘Different protection processes may need to be invoked for different parts of the world,’ Maguire warns. ‘Anyone considering outsourcing needs to understand exactly how far a contract will protect them.’
It’s easy to feel swamped by risks to your firm’s chances at success (or even survival), but being aware of these and dealing with them in the early days can save a lot of grief later on. If you’re feeling overwhelmed though, it’s worth keeping Kalar’s approach in mind: ‘There will always be risks in business, but it’s the greatest risk that leads to the greatest reward.’