Starting a business is a rewarding process, but it doesn’t come without its risks. This goes much further than just finances, and there’s quite a few business risks to be aware of.

Beyond that, you’ll need to protect yourself from business risk as much as you can. Countless entrepreneurs struggle with this, and it’s the root cause of many of them going out of business. Naturally, that’s not something you’ll want to happen to you. Figuring out how to do this can be complicated.

It doesn’t need to be, though. More than a few strategies can help with this, and they’ll mitigate more risk than you’d think. If you’re starting or running a business, it’s worth putting the time and effort into them.

 

What is Business Risk?

 

Before diving in, it’s worth defining what business risk actually is. The term is constantly thrown around, but countless entrepreneurs mightn’t be sure about what it actually is.

In short, it’s the exposure to factors that could cause your business to fail. Even factors that bring it close to this point fall under the term. These can be both internal and external factors. Poor management, shifts in the market, and similar factors can be some of the more notable.

Some relatively easily overlooked factors also include:

• Government regulations
• Competition
• Economic climate
• Changing consumer preferences

That doesn’t mean all business risks are similar, however. Instead, there are several types of business risk: strategic, compliance, operational, and reputational.

These can all impact your company in various ways. Some will even have more of an impact than others when you’re not protected from them. That’s why it’s always worth putting the time and effort into it. If you don’t, your business could go under, which everyone wants to avoid.

Figuring out how you can actually do this is where you could struggle, though. Finding the right strategies to protect yourself from business risk is essential.

You could try more than a few of these, but they mightn’t have as much of an impact as you’d like. That’s why it’s worth focusing on the most effective of these. Once you do, you’ll have much less to worry about going forward. You’ll end up being more likely to see success in time, and you shouldn’t have to go through many problems.

Seven of these stand out. Not only will they be effective, but they should be easier to implement than you’d think. It’s just a matter of actually putting the time and effort into them.

 

Protect Yourself From Business Risk: 7 Effective Strategies

 

1. Keep Written Agreements

You’ll naturally enter into agreements with countless people and other businesses in time. These will be suppliers, employees, and much more.

While all of this should go well, it doesn’t mean it always will. Vendors or other third parties could go back on their word, which then causes chaos in your company. The key to this is keeping written contracts for any agreements you enter into. They offer you much more protection, and should make sure third parties actually stick to their words.

If they don’t, you’ll at least have everything you need for a lawsuit to rectify the situation going forward. Your written contracts and agreements will be essential for this.

2. Keep Business & Personal Separate

When you first start a business, it’s natural to pump a decent bit of your own money into it. That doesn’t mean you don’t need to be careful with it, though.

Instead, you’ll have to take the right approach with it. Separating your business life and personal life is recommended. That includes making sure your personal finances and business finances are completely separated. Having a personal bank account and business bank account could be vital. You could run into legal and financial risk if you don’t.

You can even make accounting much easier by keeping everything separate. While that takes a little time to set up at the start, it’s worth it.

3. Don’t Overlook Cybersecurity

Since there are countless business risks to be aware of, it’s easy to overlook some of them. One you shouldn’t forget about is cybersecurity.

Cybercrimes are getting more and more common, and these can wreak havoc on your business. Criminals could steal data from your network and devices, and even shut them down completely. Put some time and effort into making sure you’re as protected as possible against them.

Work with specialists is recommended. Some even focus on specific industries, like FDA medical device cybersecurity. Invest in this early and often.

4. Pick the Right Business Structure

The way your business is structured plays more of a role in preventing risk than you’d think. That’s why it’s always worth making sure you pick the right one for your company.

There are several types to choose from, ranging from sole proprietorship to limited liability company (LLC). These all offer varying levels of protection, especially for you as the owner. An LLC, while more time-consuming to set up, offers the most protection, so it could be worth going with that.

Take the time to research each type of business structure and pick the one that best suits your needs going forward.

5. Get Comprehensive Insurance

No matter how much you try to protect yourself from business risk, something unexpected can happen. Accidents, natural disasters, and even lawsuits could come up.

Sometimes, these can be impossible to prevent, but that doesn’t mean they should wreak havoc on your company. By investing in comprehensive business insurance, you mitigate the financial risk associated with them. That way, you don’t risk the financial impact of these forcing you out of business.

While that naturally means paying a relatively large premium every month, it’s more than worth it in case something comes up.

6. Register a Trademark

Your business will create a certain amount of intellectual property and even designs. These need to be protected from potential theft or fraudulent behaviour.

That’s where trademarks come in. This gives you a legal foundation for a lawsuit if somebody tries using what legally belongs to your business. Your company’s name should be a part of this, as it prevents others from starting a company with the same name. If they do, you have a basis to sue and force them to change their name.

It also helps you to prevent accidentally using another trademarked name, so you don’t end up on the receiving end of a lawsuit.

7. Maintain Business Compliance

You’ll need to be aware of all legal regulations related to your business. Some of these affect all companies, while others only focus on those in specific industries.

Know about every law that affects your company and how it operates. Once you do, you can make sure you don’t fall afoul of them. By maintaining your business compliance, you avoid any kind of fines from the government, and similar actions. Since these are incredibly serious, they’re areas you wouldn’t want to fall into.

While that could mean spending time adjusting operations and processes, it’s a sure-fire way to protect your business.

 

Protect Yourself From Business Risk: Wrapping Up

 

You’ll need to protect yourself from business risk as much as you can. It helps make sure your company has the greatest chance of success going forward.

At the same time, it’ll help avoid countless problems and a lot of worry. There’s no reason not to put the time and effort into it. Thankfully, this doesn’t need to be as complicated as you could think. With the right strategies, it’ll be more straightforward than you’d think.