Some days, when the sun is shining and the birds are singing while you’re sitting at your desk sipping a coffee in your home office, it may barely feel as though you’re at your place of work at all.
But just because a business is run from home doesn’t make it any less susceptible to risk. While a home-based business may feel more informal, there are a number of factors that can impact day to day operations, or even force a business to shut down completely.
A huge number of home-based business owners are not taking the right steps to protect everything they’ve worked so hard to build. As a result, the failure rate for small businesses is high, yet many could have been saved with proper risk planning. Being ignorant to risk and working on the assumption that nothing bad will ever happen leaves you exposed, while an overconfident ‘it’ll never happen to me’ attitude also leaves a business wide open to a vast array of risks.
The problem is, risk comes in many forms. Some you can prepare for, but some you can’t. That’s not to say that all risk is bad. After all, without taking some risks, you never would have started your own business to begin with!
With the hard work and dedication that goes into running a home-based business, protecting it at all costs should be very close to the top of your list of priorities.
A smaller business does not equate to smaller risks
Most home business owners understand there are risks associated with running a company but don’t take risk planning and management as seriously as they should.
A company run from the comfort of your own home can face the same problems as a corporate, but will not have the same cash reserves or resources on standby required to recover quickly. A home-based business may struggle to replace business-critical equipment if it breaks unexpectedly, will not have a whole team of people to manage a PR disaster, and may not have the cash needed to fight a lawsuit as a larger organization would have.
Even if you’re super careful, the odds are that at some point, something will happen that presents a threat to your business. Identifying and understanding the risks you face starts with putting together a robust risk management and recovery plan. This helps minimize the impact of issues your business may encounter, allowing it to get back on its feet in no time if the worst should happen.
Identify, understand, prevent, protect, recover
The first step to take is identifying and understanding the risks your home business may face. This includes;
- Operational risk – factors that affect the day to day running of your business, for example, if your internet goes down and your provider couldn’t fix it for a week
- Compliance risk – anything relating to legislation or regulations that apply to the running of a business, such as having the right permits and licenses
- Financial risk – all matters that involve money, from a customer paying late to having enough cash in the bank to make it through quieter periods
- Strategic risk – this covers risks that come with growing a company, so if an online ecommerce business wanted to sell in a new country, it would fall under this category
- Reputational risk – the effect on a business if its customers or suppliers lose trust, including things like managing negative reviews on social media
There is often some crossover between these types of business risk even when looking at a single scenario.
Additionally, some risks will have a higher impact on a business while some will be more likely to happen than others. Once the factors that could impact a business have been identified, there are three core components to risk planning; prevention, protection, and recovery.
So where should you begin when it comes to actually developing a strategy that shields your business from harm? We understand that risk planning can feel like a daunting task. That’s why we created The big guide to small business risk – a free resource containing practical on how to prevent, protect against, and recover from incidents that could impact your home business.
Find out more by downloading your free copy today: https://www.insurancebee.com/small-business-risk-guide
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