Not too long ago, running my own small business and being responsible for 75 employees, made me acutely aware of the kind of risks that my business, my employees and I were susceptible to. After all, the element of risk is embedded in the DNA of any business.
The current global volatility just makes this gene even more dominant! There is, however, one differentiator between a successful entrepreneur and a not so successful one – it is his/her ability to anticipate, prepare and effectively navigate their way through risks and disasters. Even the vital and booming INR 990 crores Indian SME sector took a hard hit during the recession.
This wake up called proved that there is little one can do to avert disaster. Instead, what the recession taught us was how to mitigate risks and navigate our way through a crisis. Through my years as an entrepreneur and in my current position at Intuit India, I have learned that even in the moments where you feel most powerless, you still have some amount of control.
Maximizing this control comes from constant practice and prep! Remember your high school, college entrance and job interviews when you had to do a SWOT analysis? You might have found the exercise cumbersome at that point in time but this simple self-analysis can save you and your firm a lot of trouble down the line. Identifying your enterprise’s strengths, weaknesses, opportunities, and threats gives you a chance to capitalize on your strengths and straighten out chinks in your armor.
Addressing any severe weakness is key, as you are just as strong as your weakest link! While SWOT is great for internal analysis, study your external environment using a PEST (Political, Economic, Social, and Technological) analysis.
There are all kinds of risks that small businesses are vulnerable to, some of these include financial, marketing, operational, strategic and other risks. This vulnerability makes it necessary to monitor the immediate business environment. This is one of the surest ways to do some serious damage control. For instance, if your organization is already in a crisis, a recently amended governmental policy could save your day.
However, in order to make use of such external factors to your advantage, you first need to be aware of them. As a small business owner, you also have the advantage to use one of the simpler tools to analyze risks, since there is relatively lesser number of factors that affect small businesses when compared to a larger corporation.
Entrepreneurs can even look at a qualitative risk analysis from time to time. Once the risks are identified, take steps to address them in a timely manner. Also, be prepared with Plan B, C, D and more! It is imperative that contingency plans are developed. As pessimistic as this may sound, being prepared for the worst will help you when things take a turn for the worse. Yes, think of all the things that can possibly go wrong and this way you would even be able to savor all those moments when things go as planned. Always remember to make the best utilization of available resources and start by making smart investment choices.
This wins half the battles for you! Resources include both material and human assets. When disaster hits, make the best of the resources you have in hand. For instance, an employee who can multitask or a gadget that can take on double the workload would be your best bet. Speaking of resources, anyone would agree when I say that, “money is probably the first resource on your mind as an entrepreneur!” Hence, exercising financial discipline from the word go is important but it becomes crucial during a crisis.
Invest in a good financial and business management software that provides you crucial insights on the health of your business. A good adage to keep in mind is that every penny saved is a penny earned, so curb back on unnecessary expenses and overheads. Remember that austerity measures don’t just hold good for the Eurozone! It is critical for entrepreneurs to remember that managing risks and preparing for a crisis is an on-going process rather than just a one-time task.
The one rule that I can’t stress enough is – “Don’t wait for issues to take catastrophic proportions!” The next time there are some red flags along the way, address them immediately.