Monday, October 19, 2015

Business basics–4 of 5

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This is the fourth in a five part series of articles about improving your business. It is aimed at those people who run a small business but could just as well apply to anyone earning an income. In the article I'll focus on one or two main points around the theme but remember there is a lot more to explored in each topic.

The 5 topics that I will cover in these articles when it comes to business are:

1. Reason

2. Revenue

3. Resources

4. Risk

5. Reduction

These topics are drawn from the mentoring model I use with my students and is somewhat unique to other methods that are common place. This means you'll need to prepare yourself for concepts that are very different from 'industry standard' so I encourage you to keep an open mind on what I present here and at least test it against your current version of business reality. Please feel free to provide any feedback on what I present here either in a comment or to me directly. I welcome all feedback and opinions. All I ask is that you be respectful because if you don’t I reserve the right to remove or ignore such comments.

If you haven't done so already, I encourage you to read the other parts in this series – Reason, Revenue and Resources - to give you a better context of my thought process. Also don't forget that this is only part 4 of 5 in series and I'd encourage you to read them all and then let me know what you think.

Now part 4 – Risk

The world in which we live is an uncertain place. Although much may seem routine and safe, there is always risk lurking in the background. The smart business operator knows they can’t eliminate risk, all they can do is minimise it.

Minimising risk is a discipline that needs to be worked at constantly. It is achieved through implementing things such as standard processes and procedures as well as reviewing and adjusting these on a regular basis.

One of the largest risks that many small businesses face is cashflow, which for many is all about being paid in a timely manner. It is therefore important to establish credit terms up front with customers and ensure they are aware of when payment for goods and services are due. If you provide good products and services you should never be afraid to ask for the value that they provide.

Even though credit terms have been made clear up front there are times when payments fall outside these. Most smaller businesses lack a formal collection process to ensure they get paid. With todays technology it is relatively easy to implement an automated email reminder sequence that prompts the customer that payment is due. The benefits of systems are they can be built once and implemented many times. If payments are still not forthcoming beyond these reminders few have processes to handle this. Why not?

Another risk in the technology game is falling behind with industry change. The solution here is to allocate an amount of time to staying current and actually use the latest technology. It should also be the discovery of quality information sources that can provide the best information in the shortest amount of time. Again, the solution to minimising such risk is to create and implement a system.

Over time there is little doubt that the system will need to be ‘tweaked’ and improved but this is far easier once it has been established.

The secret with risk then is to ‘be prepared’ as best you can. Some things will certainly come out of the blue, but the more prepared you and your business are the more likely it is that any negative impact will be well and truly minimised.

You can of course never know where, when or how events will unfold and this means that being prepared is a constant practice that needs to become simply a matter of the way that you run your business every day. You need to view the reduction of risk as important and your sales, marketing, accounts, etc. If you run a businesses that employs others it is also important that you imbue this attitude throughout the business. Doing so not only makes it a physically safer place to work but also make it far less stressful, resulting in a more appealing and attractive place to work.

Risk is all around us. We can either take control of risk or we can leave it to random chance. The smart business owner understands that risk is part of their business and seeks to control it as much as possible. They achieve this through systematic processes and culture that seeks to address and minimise risk no matter where it appears. Risk is an opportunity for you to improve your business every day, those that step up to this opportunity always benefit, those that don’t are simply rolling the dice in the hope that they will never have to face the consequences. Successful business is not a gamble, it is a systematic approach to achieving the goals you have set.

Image courtesy of luigi diamanti at FreeDigitalPhotos.net