As forward-thinking as some entrepreneurs and business owners can be, many of them fail to think about the potential risks that could impact their companies down the road.
As an advisor, part of my job has been to identify underperforming and overlooked businesses that I help to turn around and make profitable again. A regular observation I’ve had as an advisor is how common it is for leaders of these companies to turn a blind eye to what could potentially destroy their business development or their entire company altogether.
Some leaders only see risk when it’s right in front of them, and then there’s little that can be done to stave off the full impact of the problem. Then, there are some business owners that are lucky enough to make it over these hurdles, but what they don’t realize is that even though they’ve survived danger, it could have other consequences on their business, like dwindling the value of their company.
Risk is part of the job, so entrepreneurs often become complacent in the face of risk. Because they see it as inevitable, they just expect it but do little or nothing to plan and prepare for it. Leaders can also be hopelessly optimistic and prefer to only focus on positive aspects of the business rather than plan for difficulties. Just because you know your company will experience rough patches and distress doesn’t mean that you should just sit back and accept it. Instead, be proactive about identifying factors that you could be overlooking that are currently hurting your business. Here are a few examples:
Look for that ‘single point’ of failure
A single point of failure is a part of your business that, if it failed, could ruin your entire operations. Learn from the mistakes that some online retailers made back in 2011. After Google released its first Panda algorithm update, it resulted in the closure of many online stores. The companies lost their only source of traffic, and therefore, their revenue. They had no choice but to throw in the towel.
They didn’t have a plan B in place in case something like that were to happen. Instead of being prepared with a paid marketing strategy or building a lengthy email list for a targeted email marketing campaign, their businesses couldn’t withstand the hit they took from lost rankings. If they had looked ahead, some might still be around today.
Overlooking internal talent
Your employees will inevitably leave your company to move on to other opportunities. What happens when those positions need to be filled? Many leaders immediately look towards recruiting outside talent, but this can be both expensive and time-consuming.
The best candidate to fill that open position is likely already working for you. Look inward to find employees you can promote into these roles. If you prioritize employee development, they will already be prepared to take on the new responsibilities that came with the promotion. Because they’re already part of the culture and know your mission inside and out, they are not only more likely to excel, they are also more likely to stay at your company for the long-term.
Developing the management skills of your team
Managers are responsible for driving a company towards profitability, but they are also in charge of the employee experience. The consequences of poor management can affect everything from company morale to your bottom line to the reputation you have in your industry.
Managing people is often a skillset that leaders overlook in their team. Too many businesses only focus on someone’s approach to business planning and development rather than their emotional intelligence. Your managers must know how to grow employees and manage a diverse team. This is just as important to growing your company as a business strategy is.
Your business will always be prone to risk, and there will always be hurdles along the way. Pay attention to every aspect of your business so nothing goes unnoticed. It’s these factors that make your business more susceptible to risk and can impede your growth.