Common Risks in Business Ownership

🛑 The Unspoken Reality: Navigating the 5 'D's in Business 🛑 Yes I am going there! Challenges are as certain as change itself in the life of every business. Yet, many leaders often overlook planning for the critical yet unforeseen. Let's discuss the 5 Ds—death, Disability, Divorce, Disagreement, and Distress—and their profound impact on businesses, often leaving them in turmoil and an unprepared family trying to pick up the pieces. 1. Death 💔: It's uncomfortable yet necessary to confront. The passing of a key figure can destabilize operations and leadership. The National Association of Corporate Directors found that less than 25% of private companies have a formal succession plan in place. What’s more, does the family know the plan, and who is the successor to represent the estate’s interest in the business? 2. Disability 🚑: Unexpected health issues can sideline crucial contributors, disrupting business flow. The Council for Disability Awareness notes that 1 in 4 of today's 20-year-olds will become disabled before retirement. 3. Divorce 💔: Personal life events can spill over into the business, affecting ownership, operations, and morale. The American Academy of Matrimonial Lawyers study found that businesses are involved in 62% of divorces. 4. Disagreement 🤝: Cohesion is key. When partners or leaders disagree fundamentally, it can cripple a business. I’ve seen it first hand inside clients. Harvard Business Review highlights that 65% of startups fail due to co-founder conflict.   5. Distress 😰: Economic downturns, market shifts, or sudden loss of business can lead to critical stress points. Bloomberg states that 20% of small businesses fail in their first year, a number often exacerbated by inadequate planning for distress. Each of these 'D's poses a significant risk, yet, with foresight and strategy, their impact can be mitigated. Harvard Business Review found that over 70% of businesses don’t have a solid plan for these scenarios. That’s a staggering number! 📉 🔍 Many first-generation business owners have a high-risk profile to get the business required, and as they grow, they ignore what could destroy their life’s work in short order. Risk management is not merely an option; it's a necessity. Cultivating resilience against these 5 'D's involves: Establishing a robust succession and estate plan. Insuring against disability and operational disruptions. Preparing a prenuptial or buy-sell agreement in partnership scenarios. Encouraging open, constructive dialogue among leaders. Maintaining a healthy emergency fund and diversifying income streams. It's about transforming potential vulnerabilities into strengths, ensuring your business survives and thrives, irrespective of its challenges. 👥 Have you identified any of the 5 'D's as potential risks within your own business? What steps have you taken to safeguard your enterprise against them? Let's discuss below 👇.

🚀 𝗥𝗶𝘀𝗸 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗲𝘀 𝗳𝗼𝗿 𝗘𝗮𝗿𝗹𝘆-𝗦𝘁𝗮𝗴𝗲 𝗖𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 🚀 As a fractional CIO, I've witnessed firsthand the ups and downs of launching and scaling new ventures. While early-stage companies prioritize innovation and growth goals, effective risk management is frequently overlooked despite the severe consequences of neglecting this crucial area. Startups face many obvious and hidden risks, including cybersecurity threats, operational issues, financial instability, and changing market conditions, which can disrupt even the most promising ventures. Understanding and preparing for these risks is not just about protection - it's a strategic advantage that can give your company a competitive edge. 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗲𝘀 𝗳𝗼𝗿 𝗥𝗶𝘀𝗸 𝗠𝗶𝘁𝗶𝗴𝗮𝘁𝗶𝗼𝗻: 1️⃣ 𝗖𝗼𝗺𝗽𝗿𝗲𝗵𝗲𝗻𝘀𝗶𝘃𝗲 𝗥𝗶𝘀𝗸 𝗔𝘀𝘀𝗲𝘀𝘀𝗺𝗲𝗻𝘁: Start by identifying potential risks across all facets of your business, including operational, financial, strategic, and compliance risks. Understanding the breadth of what might go wrong is the first step toward mitigation. 2️⃣ 𝗣𝗿𝗶𝗼𝗿𝗶𝘁𝗶𝘇𝗲 𝗕𝗮𝘀𝗲𝗱 𝗼𝗻 𝗜𝗺𝗽𝗮𝗰𝘁: Not all risks are created equal. Prioritize them based on their potential impact on your business and the likelihood of occurrence. This will help you allocate resources effectively, focusing on what matters most. 3️⃣ 𝗖𝘆𝗯𝗲𝗿𝘀𝗲𝗰𝘂𝗿𝗶𝘁𝘆 𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸: In today's environment, cybersecurity is a cornerstone of risk management. Implement robust security measures, conduct regular audits, and ensure your team is educated on the importance of cybersecurity hygiene. 4️⃣ 𝗗𝗲𝘃𝗲𝗹𝗼𝗽 𝗮 𝗥𝗶𝘀𝗸 𝗠𝗶𝘁𝗶𝗴𝗮𝘁𝗶𝗼𝗻 𝗣𝗹𝗮𝗻: For each identified risk, develop a mitigation strategy. This could range from insurance to diversifying your supplier base, implementing strict financial controls, or having a crisis management plan. 5️⃣ 𝗙𝗼𝘀𝘁𝗲𝗿 𝗮 𝗖𝘂𝗹𝘁𝘂𝗿𝗲 𝗼𝗳 𝗥𝗶𝘀𝗸 𝗔𝘄𝗮𝗿𝗲𝗻𝗲𝘀𝘀: Risk management should be a part of your company's DNA. Encourage open discussions about risks and ensure your team can proactively identify and respond to them. 6️⃣ 𝗥𝗲𝗴𝘂𝗹𝗮𝗿 𝗥𝗲𝘃𝗶𝗲𝘄 𝗮𝗻𝗱 𝗔𝗱𝗮𝗽𝘁𝗮𝘁𝗶𝗼𝗻: The startup ecosystem and its risks are not static. Regularly review your risk management strategies and adapt them as your company grows and new risks emerge. As startups aim to innovate, incorporating risk management into your core strategy ensures preparedness for potential obstacles and a path toward sustainable growth. Being risk-aware doesn't mean being risk-averse. It's about making informed decisions and safeguarding your company's future without hindering innovation. Interested in fortifying your startup's future while fueling innovation? Reach out to me to learn how. 💡

Have you ever heard statistics about worrying? A 2021 Cornell University study showed that 85% of what we worry about will never come to pass. In the business world, worrying about whether a gamble will pay off or if the efforts of a certain project will yield expected results comes down to that all too elusive concept: risk tolerance. But how do we know when risks are REAL versus PERCEIVED? When talking with candidates who are interested in franchise ownership, we often discuss the risks below. PERCEIVED Risks: ❌ 1. There is too much competition. 🔊Response: For everyday essential services, a national platform can deliver superior tech stack and customer experience vs. local competitors. Execution risk is the real concern (see below). 2. It is hard to find/manage employees (or I will have to pay too much) 🔊Response: Good employees are everywhere. You need to pay market prices, but nothing more. Having a compelling culture and no red tape is very appealing to many hourly employees versus a big brother type corporation. 3. What happens in the case of a recession? 🔊Response: Recessions are the best time to launch a business and begin ramping up, so you’re hitting stride as the economy rebounds. It always cycles. Plus costs, labor and rent are typically all better and cheaper. 4. General fear of failure. 🔊Response: This is mindset - scarcity vs. abundance. Validate with franchisees in any system and get the real answers rather than conjecture. FEAR = False Evidence Appearing Real. 5. I’ll have to work too many hours/I’ll have no freedom. 🔊Response: You are the boss and can dictate how you want to run your business. You already have a good work ethic if you’re starting a business. Invariably, owning a business increases quality of life. REAL Risks: ✅ 1. Execution Risk: 🎯Ultimately, it’s up to you to build your business and overcome obstacles rather than give up. This is the most important and real risk, yet most candidates often don’t consider this. 2. Macro Risk: 📊The economy, Covid, etc. are things you can’t control, but also impact every other business owner in America. Just plan for your contingencies. Keep your goals static, but your methods flexible. 3. Location Risk:📍If you’re going into a brick-and-mortar model, this can be a factor. Take extra care in your site selection and trust a combination of franchisor criteria, local broker knowledge, plus your intuitive knowledge of the market. 4. Liquidity Risk:💰One of the most common causes of failures isn’t the business model, but lack of working capital to get the business stabilized. To discuss how REAL vs PERCEIVED risks factor into your franchise future, call or DM. #success #motivation #entrepreneurship  _________________________ → Follow & ring the 🔔for more franchise/business ownership tips & insight