Some time ago, the UK Insolvency Helpline performed a survey of the top 50 reasons why small businesses fail. What do you think the top five were?
The UK Insolvency Helpline is an online resource which provides all types of commercial entities and individuals direct access to professional advice on debt and insolvency issues. Its survey revealed the top 50 reasons why small businesses fail. What do you think the top five were? Cash flow issues, insufficient custom, stiff competition? I could go on to list all 50 reasons and some might even surprise you, but nowhere will you see poor risk management.
Each and every one of the top 50 reasons is simply a risk that has materialised. A situation or event that has arisen that was not managed. Either it happened out of the blue and it was too late to do anything about it, or it crept up slowly, without drawing attention to itself, and by the time it was realised the damage was done.
Many small businesses are so focused on staying afloat that risk is nowhere on the agenda. They just do not seem to have the time to consider all the things that could go wrong and really it is not something that they like to dwell on. However, if the worst case scenarios are not recognised, at least to the extent that is known how likely they are to occur and what the impact to the business would be, then if and when they happen, there is no contingency plan.
Recent years have seen businesses flooded, sometimes repeatedly, and often in unexpected areas. Many of these small businesses were so severely impacted by these unexpected events and, despite their insurance cover, simply could not recover from their loss in time to sustain their business. How would you fare if your premises, equipment, transport and people were suddenly unavailable?
Ostrich management may seem to be the easiest option but can you afford to risk it?
