Business risks to avoid

One of these is not good, 3 is worrying, and five or more is a serious problem:

  1. A failure to assess, monitor and plan for the risks facing the business
  2. Reliance on very few suppliers or customers, or even a narrow market segment (record-labels anyone?)
  3. No succession or contingency planning in case key individuals become unavailable (through illness, departure etc)
  4. Using overdraft or other short-term funding on long-term assets (withdrawal of bank funding is becoming an increasing occurrence and the consequences could be terminal)
  5. Growing too quickly (it is not unheard of for the capital required to fund stock and debtors to exceed the funding available from taking credit from suppliers and banks)
  6. Inadequate monitoring and reporting of the cash position and future cash requirements
  7. Accounts that arrive too late, are inaccurate or focus solely on the distant past. Also beware if the key business indicator (such as order-book) is not part of the traditional accounting process and not regularly monitored, particularly for decline
  8. A business model at risk of being undermined or superceded by the internet, other technological changes or cheap competition from China
  9. Exporting/gifting your Intellectual Property to China, India et al
  10. Non-existent or sycophantic management team – no one who dares put an alternative view to the boss (or they will not listen)

Next topic – starting a new business venture