Your business’s weaknesses, or internal risks, can make it more difficult for you to achieve your goals. Internal risks include those associated with human error, equipment, debt and cash flow.
Some risks are associated with the people who help run your business. Consider these possible human risks to your business and tactics for managing them:
- Illness. A business owner or employee may become ill, putting pressure on your daily business operations. Likewise, if you become ill and are not able to work, you should have a plan in place for who will take over your responsibilities.
- Theft. These are risks associated with theft and fraud, such as when employees change their hours on their timecard, or steal money or merchandise or when business partners divert funds to their personal accounts. Doing thorough interviews and asking for personal references could help prevent theft. Using digital time-tracking software and installing security cameras in your offices or stores could also help.
- Low productivity. Having employees who are not dedicated to their work and have low productivity can put the growth of your business at risk. Make sure to hire reliable employees and set processes in place to address employees who aren’t performing well.
Equipment and software
If your business relies on equipment, you probably know that breakdowns can occur and repairs can be expensive. Older equipment may need more maintenance or run more slowly, and learning how to run new equipment can take time. This also applies to information technologies, like digital tools you may rely on to run your business.
To minimize potential issues, back up your digital information online or with an external hard drive. If you can afford it, investing in a backup device may be worthwhile. Also, consider the benefits of leasing versus buying equipment, securing warranties for equipment and purchasing insurance.
Lack of money
Some businesses face great opportunities they can’t act on because they don’t have enough money. For example, they may have to turn down a big order or pass on an opportunity to buy a discounted piece of machinery because they lack funds. To ensure this doesn’t happen to you, keep a savings fund on hand for unplanned expenses, learn about the different ways you can borrow money and know how to get a low rate on a loan.
Borrowing money can help you grow your business, but having too much debt can put your business at risk. To determine whether your debt load is more than you can afford, calculate your debt-to-income ratio by comparing your monthly revenue to your monthly debt payments. Learn more about how to calculate your debt-to-income ratio and manage your debt load in the Debt section.
Cash flow issues
Financial issues can cause major problems in your business. If you can’t predict your business’s cash flow (the timing of when you get paid and when you have to pay bills) and keep up with bills, your success will be at risk. To prevent this from happening, learn more about cash flow and how to effectively manage your finances.