Owning your own small business can be rewarding, yet extremely challenging and stressful. Juggling responsibilities while mitigating the threats against your business can feel impossible. Small business owners should be sure to address the top threats against their company to ensure they’re prepared to manage them when they occur.
Threats To Small Businesses and How to Manage Them
- Cyber Security
- Employee Injuries
- Business Interruption & Property Losses
- Unexpected Costs
1 – Cyber Security
Cyber attacks pose a serious threat to small businesses. It’s a common misconception of small business owners that since their business is small, it won’t be the target of a cyber attack. Unfortunately, this is untrue.
Small businesses can be better targets for cyber crime than large businesses, as they commonly invest less in cyber security, IT, and are less aware of the threats posed against them. While large enterprises may deal with huge sums of data and money, they have better developed cyber security systems and are constantly on the lookout for data breaches.
To help support the cyber security of your small business, you should research the following types of cyber attacks and create a risk management and response plan for each of them:
- Phishing Attacks – An attacker pretends to a tested contact to have you click a malicious link, download a malicious file, or give away sensitive information
- Malware Attacks – An attacker uses coding to gain access to your networks and data and can cripple devices
- Ransomware – An attacker encrypts your company’s data so that you cannot access it and demands a ransom to unlock the data
- Insider Threats – In internal current or past employee can purposefully or accidentally allow data breaches, or use weak passwords that are easily guessed by hackers
2 – Employee Injuries
Many times, small businesses aren’t prepared in multiple ways when it comes to employee injuries. When a business owner doesn’t realize the extent that employee injuries can have on their business, it can lead to extremely high insurance premiums that won’t lower for years. In addition, when an employee is injured on the job, it’s the duty of the business to provide worker’s compensation coverage and indemnity payments, which can go on for an extended amount of time.
Not only can employee injuries inflate business costs, they can also hurt productivity and the workflow of your business. Sometimes small businesses rely only on a handful of employees to keep their operation going, so when one is unexpectedly out for an extended amount of time, it can seriously strain productivity.
In all, small business owners need to be serious about educating their workers on proper workplace safety and risks. This way, they can better prevent accidents that result in a strain on your cash flow or productivity.
3 – Business Interruption & Property Losses
40% of businesses don’t reopen after a flood or fire – and most of the time this is due to lack of proactive planning and risk management. Small businesses must prepare in the event that a natural disaster or fire prevents them from operating from their office or storefront. You may have the proper insurance coverage to repair and restore the damages from the disaster, but do you have funds to operate in a temporary location? Do you have a way to cover your loss of income whilst your business is closed?
To properly protect your property and the life of your small business during a disaster, you must have two things; Proper commercial insurance coverage and business interruption coverage. Business interruption coverage covers operating expenses and lost income while your property is being restored after water damage a fire, or a natural disaster. Proper insurance coverage will ensure you can afford to repair your business at all. Together, they can help your small business to get back up and running smoothly after a disaster.
4 – Unexpected Costs
The economy, business, and life are unpredictable. For small businesses, sudden large, unexpected expenses can be crippling. As a small business, you should do what you can to have an emergency fund of cash to ensure surprise bills, repairs, or taxes can be paid. Small business owners should sit down and create their yearly budget, which outlines all regular operating costs and expected bills and their due dates. This outline should also include any permits or licensing fees your business may need to continue operating.
When it comes to the bottom line, small business owners need to limit unexpected costs to ensure a positive cash flow. You can determine your cash flow by calculating the difference between your accounts receivable and accounts payable. When large, unexpected costs hit, your business can easily go bankrupt if it negatively impacts your cash flow. If you can’t pay your employees or suppliers, your small business will quickly fall apart.
Create A Risk Management Plan
It’s hugely important to invest in creating a secure future for your business. With so many threats to small businesses that haven’t even been mentioned here, your small enterprise can quickly fall apart. You cannot hope for the best scenario while not planning for the worst – or else you will never be prepared when disaster inevitably strikes.
To create a risk management plan for a small business, the first step is to sit down and identify all potential risks. Think about possible scenarios that could happen to your business, whether its related to a natural disaster, cyber attacks, physical crime, your supply chain, or even key person losses.
What would you do if the employee you rely on most left? Can you pay the ransom in a ransomware attack? Are all of your files backed up on a separate server so that you can still access them in cases of a data breach? Will you continue operations in another location after a natural disaster, or put everything on hold until your property is restored?
There are hundreds of questions to ask yourself when creating a risk management plan – don’t be afraid to dig deep and over prepare! The future of your small business may rely on it.