Risk is always going to be present in any business. This risk, however, is inherently greater for a small business. Studies and research have shown staggering statistics regarding the failure rate of businesses falling into these categories whether a business is located in the U.S. or other international country. Even for those businesses still operating after two years, five years, or even longer, business risk is still present. Competition, the economy, changing times (i.e., a global pandemic), employee turnover, availability of new products and services, or disruption of a supply chain all contribute to risk.
Considering the many variables that can affect the outcome and profit of a business, inherent risks must be reduced to calculated risks and possibilities that might work best for the business.
Try and Test
Taking a conservative approach to new or updated products and services through a series of trying and testing can significantly reduce the risk for a small business. Rather than putting all eggs in one basket, testing the market for acceptance allows a business to judge the possible future effects of what is being offered or what is considered to be offered at a later date.
The expression…ripple then splash…is an analogy to try and test. This is basically testing the water with an idea to obtain customer reactions before investing valuable financial and manpower resources. A business can then judge if the ripple is what was expected. Was it smaller or larger, negative or positive? From this type of test, adjustments can then be made to products, services, marketing, personnel, etc.
Try and test can be repeated numerous times until the right recipe is found. When everything is in place, then the time is right to make a big move. Throw a pebble, make a ripple. If the ripple worked as expected, then a boulder can be thrown to make a splash!
Seek Feedback
There is nothing that can compare to obtaining relevant feedback from customers and prospects. Seek their input and advice. Owners, managers, and employees have their own ideas, but it’s customers who purchase and ultimately pay the bills for a business. Ask them what they want.
Feedback can be received by simply talking to customers and prospects, emailing questionnaires, or following up with a quick call to more elaborate forms of feedback such as focus groups or secret shoppers. Whatever method of data collection is used, the feedback received can aid in lowering a business risk by offering products and services that customers want. Customers purchase benefits and seek solutions to their problems. These might not necessarily be the benefits and solutions that the business thinks they want. The only way to find out for sure is to ask and seek feedback…another risk reducer.
Imitate Success
There is nothing like success and there is a multitude of successful businesses in any industry in any location. Therefore, businesses should imitate success. This doesn’t mean simply trying to become a mirror image of a successful business, but it does mean taking the best ideas of many successful businesses and putting them together to form a successful business plan. Imitating success is an excellent method to not only reduce business risk while at the same time plant the seeds for future success in one’s own business.
Reinventing the wheel takes time, money, and effort and with it produces a certain amount of risk. Successful businesses have already gone through a process of finding the key ingredients important to success. Businesses should use those experiences (time, money, and effort) to produce their own positive results.
Capitalize on Strengths
While a business might offer many products or services, some undoubtedly stand out as being superior and profitable. While it is important for a business to improve on its weaknesses, concentrating on the strengths of a business can produce faster, positive results. Knowing a product or service well, how to market, and price these products or services while satisfying the needs of customers contributes to risk reduction.
Decisions, Decisions
Small businesses are confronted with daily decisions. It is how these decisions are made and what decisions are made that will contribute to the success or failure of the business. Trying and testing are important factors when decisions are made, and how those results will affect the success of a business.
