Know the Fundamentals of Risk Mitigation for Your Business

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How much business risk is acceptable? How much is too much risk?

Every entrepreneur faces risks of some kind, whether they’re jump-starting a new business or assuming leadership of an established company. But CEOs and business leaders don’t always consider the scary variety of risks they might have to contend with (at least in theory) at some point in their business’s evolution:

  • Product malfunctions
  • Disasters and business interruption
  • Injuries to customers or employees
  • Breach of data security
  • Unanticipated property loss
  • Employee theft and embezzlement
  • Violation of state and federal regulations

Entrepreneurs are by nature an optimistic group and don’t want to spend a lot of time contemplating these worst-case scenarios. On the other hand, ignoring such eventualities or failing to adequately prepare for them aren’t viable strategies for ongoing growth. It’s imperative to fully understand the potential risks to your business and to mitigate them wherever possible.

Here are key considerations to keep in mind when assessing the scope and depth of potential threats to your business:

Understand the concept of risk management. Simply put, “risk management” means recognising the likelihood that, at some point, your business will encounter unexpected circumstances with significant negative consequences. (This can also apply to unexpected growth opportunities, and understanding the inherent risks that come with those opportunities.)

The goal is to identify what form those risks are likely to take, given your specific industry and the marketplace in general, and devising strategies to lessen the negative effects.

Limit your liability. First and foremost is protecting your personal liability. For many entrepreneurs, this means switching from sole proprietorship (where you’re responsible for anything that goes wrong) to a corporation or limited liability company, where your responsibility is more limited, but your key business assets are secure and protected.

Maintain a strict separation between business and personal records. Whenever one’s personal life spills over into one’s business affairs, trouble can occur. It’s critically important to keep your personal finances and property apart from the business, so they’re not considered part of your business liability—and therefore at risk to be lost at a later time. Most entrepreneurs establish records relating to finances, budgets and taxes in both their personal lives and as business owners or leaders. These areas should never overlap.

Create contingency plans. Once you’ve identified possible risks, it’s time to create contingency plans focused on a rapid response to specific threats and ways to keep business operations running as smoothly as possible. Get into “What if?” mode. For example, if your biggest client walked away tomorrow, how would you handle the situation?

Again, the same risk-management concept applies to potentially favourable opportunities. What are the benefits and risks involved, for example, in hiring a talented new CFO? What about authorising the launch of a key product upgrade? Develop a way to assess the risk-reward ratio of your actions, so as to minimise surprises later on.

Explore your insurance options. While they may sometimes be costly, obtaining the right insurance policies can protect you against a wide range of threats, including damage from catastrophic weather events or employee lawsuits. Look closely at insurance your options and determine if and when transferring some of the big risks of business ownership make the best sense for your company.

Implement strict control and reporting systems. As sometimes happens in family-owned businesses, a company can grow in size and levels of bureaucracy, but never develop a system to identify who can make and/or authorise particular decisions. In such a void, problems are always brewing.

This is equally true when no one knows who reports to whom, and under what circumstances. These areas of risk must be addressed, for the benefit of everyone concerned.

Other preventive measures should also be considered, such as implementing stronger workplace safety regulations, instituting a quality assurance program, and closely monitoring outstanding loans and financing issues. Most importantly, business leaders need to adopt a risk mentality. It’s may be too simplistic to say anything that can go wrong will go wrong, but as any seasoned entrepreneur will tell you, it’s better to see what’s coming than to pretend it can’t happen to you.

 

What is a ‘Buyer Persona’ and How Can It Boost Your Sales?

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These days, it’s virtually impossible to lump all customers together and try to market to them the same way. Thanks to ecommerce and other consumer-empowering changes in the marketplace, the audiences you aim to serve have moved from one large, undifferentiated mass to many subsets with individual tastes and preferences, needs and challenges.

If you’re not careful, your sales team can waste valuable time and resources chasing after unqualified prospects who don’t really want or need your products. That’s what happens when a business relies upon a one-size-fits-all approach to customer acquisition.

So how can you adjust your sales and marketing efforts to identify qualified prospects and best serve your company’s various niche markets? One key strategy involves building a “buyer persona.”

You already have broad-based demographic information about your customer base. But creating buyer personas “takes that a step further to include psychographic information based on actual current client and target prospect research to focus on why your target customer makes a purchase decision.”

Here are tips to help construct buyer personas that fit your business and industry:

Organise your search for relevant data. A thorough profile of your customer emerges from numerous sources. Start by asking your current customers why they buy your products or services (as opposed to those of your competitors). What specific problems do your offerings solve? How do these products improve their own businesses and/or lives? Also, reach out to former customers and ask for candid assessments of what you did right (and wrong) when they were buying from you.

Look at trends and solicit online information. Most sales leads follow a certain pattern or trend; the key is analysing the data to see what those patterns indicate. Have your sales team look closely at which customer appeals are most effective, and with which group of customers. Compile information relating to customer age, gender, location, job title, education level, etc. Make sure the team understands why customers make the decision to purchase your products—and, conversely, why other prospects choose not to buy.

Focus on solving problems. One or more buyer personas will emerge from all this data. You’ll have a fairly sophisticated profile of what your customers are like. The key from there is looking beyond who these people are and concentrating instead on what it is they require from you and your business. What problems do they face that you may not have considered before? Are there ways to upgrade your products to better solve these problems?

Create an ideal customer experience. By understanding a buyer persona, you can alter your messaging and the content you share on your website and social media. This will inform every stage of the marketing process, including product packaging and advertising, and customer follow-up after a purchase is made. You know the people you’re selling to, so you can reframe your message in ways that genuinely resonate with them.

Often, crafting a buyer persona will narrow the scope of your sales leads—since you’re not trying to attract everyone with one generic message across the board. There’s always a concern when your team is reaching out to fewer prospects. But by leveraging buyer personas and other pertinent data, the result will likely be a higher percentage of qualified leads, ready to move through the sales funnel, with less time and money spent on the qualification process.

Want more advice on improved marketing strategies for your business? Find out if a TAB Board is right for you!

To learn more about buyer personas and to help streamline your marketing pipeline, be sure to check out our September Business Owner Success Series webinar on that topic!