How to Manage Risk for Your Business

Published on this site: November 20th, 2006 - See more articles from this month

Every business makes decisions and the reprocussions of those decisions have risks. Failing to manage the risks your business takes within acceptable levels can lead to the entire failure of your business.

If your business really isn't doing very well and looks like it is going under (9 out of 10 businesses fail within their first two years) then you want to have it fail as gracefully as possible.

1. Have a disaster plan
   
   If your business is going to sink, make sure you don't sink with the ship! If at all possible when creating your business make sure that it is incorporated and that you have a status of limited liability rather than unlimited liability. Limited liability means that if your business crashes it is treated as a separate legal entity - your personal belongings, your house, etc, won't be subject to being reclaimed and sold to give
   investors the money they lost.
   
   
2. Have a Plan b
   
   If your business looks like it is faltering, you should always have a plan B. You could borrow more money, raise prices, lay off staff, or find cheaper suppliers. In reality, however, most businesses choose to diversify where they concentrate their efforts. Instead of marketing your computer basics course to elderly people, for example, you could expand to creating courses for children. Or you could change how you distribute your product or service - instead of teaching kindergarteners in a classroom you could produce an educational CD-ROM and sell it online.
   
   
3. Going out of Business Sales
   
   People are drawn to stores that are having going out of business sales in hopes of finding ludicrously underpriced items. If you plan it well, your last day in business might not be so bad. Just make sure everyone knows that youre closing down for real, but still price everything ever-so-slightly above cost. Your focus should not be on making sure your store is completely empty but that you lose as little money as possible.
   
   
4. Selling Your Business
   
   Although you will want to provide whoever you plan on selling your business to with accurate numbers, there's nothing dishonest about selling a failing business. Your competition just might jump on the opportunity to snap up your business just to, at the same time, absorb your existing customer base.

Edward Bryce - For more great risk management related articles and resources check out http://qualitybusinessopportunities.info