- Know and Grow
- Do You Have What It Takes To Protect Your Business
Do You Have What It Takes To Protect Your Business
Owning a company or leading an organization can be grueling, uncompromising and unrelenting; but it can also be rewarding, inspiring and liberating. As you move forward in your career, much of your success will be measured by how well you were able to mitigate risks and manage full-blown crises. Fortunately, you don’t have to wait for disaster to strike to earn your stripes and secure your legacy. By taking time to identify your business’s most vulnerable areas today you not only gain the insight needed to quickly and efficiently address troublesome issues as they arise, you may be able to employ some successful preventative measures.
Do You Have What It Takes?
Check out the slide show below or click here to view the entire show.
Do You Have What It Takes To Protect Your Business? - Created with Haiku Deck, presentation software that inspires
How To Stop Common Risk Areas From Hurting Your Business
Protect Your Customers
If you are not doing everything you can to protect your customer base, you are at risk of losing them - and without customers, you no longer have a reason to stay in business. But there are steps you can take to maintain your pool of customers, including making sure that when an employee leaves they don't take their accounts with them.
- If you don’t have an employment contract or non-compete agreement on file for your key employees, you could be watching valuable clients – and revenue – walk out the door. Use contracts to protect your revenue stream.
- If a single client accounts for more than 20 percent of your revenue, you need to diversify. Customer concentration is risky for obvious reasons. Your market is full of potential customers, but you can’t just expect them to fall on your lap. Get to work identifying your ideal clients or customers and develop a strategy to reel them in.
Protect Your Daily Operations
Do you have a superstar employee? Are YOU the company's superstar employee? If so, you have a problem. ... No one should be irreplaceable. Your team is the backbone of your business – and potential buyers will want to know that they won’t miss a beat once the star employee steps away. Your goal should be to become obsolete. Your team should be so strong that your business can thrive without you.
Read Also: Step Away From Your Business
- Even if you’re not planning to sell anytime soon, you should always make sure your company is not too dependent on one employee. Hire strategically and have legal agreements in place with those who are considered key.
- If you are having problems identifying and retaining good employees, it could be because you haven’t been successful in your attempts to motivate the “right” candidates to apply. Taking a strategic approach to recruiting can help you focus on getting the right employees, in the right seats, on the bus.
- Similar to relying on a highly concentrated pool of customers, just as risky is your reliance on a concentrated pool of suppliers. Make sure you always have the part or product you need, when you need it by working with several different suppliers. That way, when one leaves or is unable to fill your order, another can step in at a moment’s notice.
Protect Your Assets
If it’s easy for competitors to do what you do, your market share is at risk – and so are your customers. Your business will be much more attractive to buyers if it’s “one-in-a-million,” rather than “a dime-a-dozen” – and they’ll be willing to pay more for it. Instead, consider what makes your company or organization unique.
Why are you better than others who may be offering something similar?
- Being different is better than being better. To protect your assets, future earnings and customer relationships, differentiate yourself as much as possible – consider trademarks, patents and contracts to protect intellectual property. And don’t underestimate the importance of innovation and outstanding customer service.
- Inconsistent financial performance is a huge red flag to potential investors. They want to know they’ll see a return on investment, not take a gamble on whether they’ll lose money in the deal. Establishing and maintaining a stable cash flow is arguably more important to your company’s success than your bottom line because it takes your past, present and future projections into consideration to arrive at a compressive analysis of your financial wellness. Your goal should be to know your numbers inside-out, and use them to make operational decisions about your business. Click here to find out more about the importance of cash flow.
- Eek! You only have one or two people managing your finances? Do you know how much this increases your chances of being a victim of occupational fraud? There are cost-effective solutions available, and many of them can be implemented immediately. Click here to learn more.
- Your life’s work is on the line each and every day. If you find yourself in a legal problem, will you waste time fumbling around to find your footing? One misstep in a legal situation can be expensive – and can damage your customers’ and employees’ trust. If your customers don’t trust you, they won’t be customers for long. Meet with a lawyer or financial advisor to determine what sort of insurance you need to carry, and how you can protect yourself from the possibility of damaging litigation. Run your operations in such a way that if you were to be audited tomorrow, you would be able to prove that your business is legally and financially compliant in every way. And be transparent with your stakeholders to maintain their trust.
- In a world that’s constantly changing, you must stay current with cutting-edge technology and trends. Becoming outdated could hurt your efficiency, or worse, your long-term sustainability. Not only should you ensure that your deliverables are current and sustainable, you also need to stay ahead of the curve in your business operations. Don’t be stubborn about adopting new technologies or adapting to new trends – embrace change to keep your company viable.
- How well do you know your competitors and the market dynamics of your industry? Take control of your business’s success by taking time to understand all aspects of your business and the industry landscape. This includes knowing the strengths and weaknesses of your competition, trends in the marketplace and staying current on relevant industry, social and economic issues.
Protect Your Future
In addition to the short-term risks you may encounter, there are long-term risks and preferences to consider. If you were to retire this year, do you have a plan in place to guide your predecessor? Have you thought about how you want your legacy and the legacy of your business to live on? Don't wait, start your succession planning strategy now.
- There are complex legal and financial issues to figure out (estate plans, retirement needs, legal documents, etc.) and equally complex soft issues (choosing the next leaders, sibling rivalry, giving up control, etc.). You’ve got to figure out a way to leave and not kill the business. The business owner that wants the business to continue must be willing to face difficult business, personal, and family issues in order to start the succession planning process. There are conflicting goals. What is good for you personally may not be the best for the business and other family members. In addition, there are other stakeholder needs that need to be addressed during the succession planning process (employees, other shareholders, customers and the IRS).
- Businesses owners frequently have buy-sell agreements. These are contracts among the shareholders who control what will happen to the stock of the company under certain pre-determined purposes. The purpose of the buy-sell agreement is to control who can be part of ownership in the business and to provide financial resources to the departing shareholder. You should review your buy-sell agreement on an annual basis from a legal, business and valuation perspective. But this is only the first step when it comes to planning for your departure. Business owners who fully understand their succession options, set a course of action to implement the plan and seek assistance to ensure the plan is being implemented as desired will see optimal results. Your financial advisor can help you develop a comprehensive succession plan which includes a baseline business valuation, exit strategy alternatives and the actual strategic plan document along with business and personal action plans.
Get Serious About Mitigating Your Business Risk
Start by identifying all of your business risks. Next, quantify how each risk factor impacts your business's value. Then, develop strategies and action plans to reduce the risks you've identified. Finally, rank each risk factor by priority and get to work. And don't feel like you have to do all the work by yourself. Help is available along the way. Email a financial planning expert for guidance as you develop your plan to protect your organization from disaster.
By Tim McDaniel, CPA/ABV, ASA, CBA (Dublin office)