Risk Management and Small Business Insurance
When you own a small business, or a start-up, its financial future is intimately tied with your own. And as any good businessperson knows, it’s necessary to accept a certain amount of risk in order to grow. Depending on your business-type, you may need to make sacrifices in favour of short-term profit or long-term stability to achieve your goals.
This is where – alongside establishing and acquiring the appropriate level of small business insurance – risk management becomes important.
Startup vs small business
There is an important strategic distinction between a small business and a startup. While both may refer to new businesses, a startup wants to grow and make a big difference fast. Small businesses seek long-term stability over expansion.
Startups will often be temporary businesses which, as they become more successful, will welcome more diverse funding sources. The founders of startups often aim to relinquish control of the business completely through an acquisition or a merger. As a result, they will naturally want to accept more risk – aiming to make a large amount of money in a relatively short period of time.
A small business owner, whose intention is to build an independent business that is successful in the long-term, should have a much lower appetite for risk.
Why small businesses succeed
Small businesses succeed when they can manage the delicate balance between profit-making risks and budget-aware decisions.
There are many other factors which contribute to a successful small business, such as: market awareness, the economy, and leadership. But ultimately in a money-making enterprise, where and when you choose to invest your capital is crucial.
As an example, for many long-established small businesses, making the move into providing online features – such as appointment booking, or ordering products – would be a good decision. It has the potential to expand their customer-base and could help to future-proof their business.
You might consider the primary danger to the business being the venture’s failure to deliver on those objectives. However, the risks associated with running a business online go further than a lack of ROI. If a small business is targeted by a ransomware attack, both its own, and its customers’ data would be jeopardised — something which can have a significant impact on their finances and their reputation
But that shouldn’t prevent a small business owner from taking a calculated risk. The potential gains of online expansion are great, and the risks are easily managed. Small businesses that succeed are not those that avoid risk, but those that take steps to mitigate it.
Risk management and insurance
Risk management for small businesses means insuring much more than just your physical assets. In the example above, with a small business insurance package that included cyber and data insurance, you would have the support of a technical team to help you get back up and running after a ransomware attack.
Whether the risk your business takes is online expansion, taking on another member of staff, opening new premises or investing in expensive but cutting-edge equipment, small business insurance can help make sure that, even if something goes wrong, key elements of your business are protected.
At Hiscox, we want to help your small business thrive. Our blog has many articles you may find relevant and useful as your business grows. But these articles aren’t professional advice. So, to find out more on a subject we cover here, please seek professional assistance.