As a business owner, you always want to find new ways and strategies to help you limit losses and avoid risks. In fact, the majority of your daily activities probably concerns this topic. So in this article, I am going to give you a few examples to help your business succeed.
So, what is loss and risk, and how to best manage it? Loss can be defined as, Unrecoverable and usually unanticipated and non-recurring removal of, or decrease in, an asset or resource. The definition of risk is “a probability or threat of damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through pre-emptive action.”
Managing Risk and Avoiding Loss
Risk management is or should be, a part of the day-to-day decision-making process of every business. No matter how large or small the business may be, learning how to manage and reduce risk is essential to running it successfully. Every business decision you make contains a certain amount of risk. Permit me the cliche, but “no risk no reward” right? Well, the saying is true, but with a stipulation. A managed risk is necessary to operate a business. Unmanaged risk, on the other hand, can very quickly turn into substantial losses and financial nightmare.
For example, let’s say that you are in real-estate. You own an apartment complex, or you rent out other housing spaces. One of the best ways that you can protect yourself and business is by purchasing landlord insurance. That way you would be protected from unforeseen damages that occur by way of your tenants. Don’t underestimate the value that having quality insurance brings to the table. Quality insurance is the best hedge anyone involved in real estate has against losses.
Continuing with the landlord theme, how else might one manage risk and losses? One way would be to fix any problems that may arise with your buildings in a timely manner — solving any possible issues before they become actual problems can go a long way in ensuring that you are protected. Something as benign as a leaky pipe can quickly turn into pronounced water damage if left unattended. Also, should you need to hire a contractor to correct an issue, make certain they are reputable. Skilled contractors aren’t cheap, but you get what you pay for. Hiring a contractor because they are cheap can, and most likely will result in future losses and damages. Having the job done right the first time will be much less expensive and beneficial in the long run.
Keep good records!
Keeping your books up to date is essential to running a successful business. If accounting is not your “cup o’ tea” then I suggest you hire a qualified accounting firm to complete the task for you. Keeping your financial records current allows you to see if your business is on the right track. How can you know if you are meeting your expectations if there is no record? A good accountant can also help you save money by claiming deductions you are entitled to come tax time. Poorly kept records can make tax season a major headache. On top of being a headache, it can also land you in a lot of trouble with good ole’ Uncle Sam. The last thing you want is the IRS breathing down your neck because you neglected to keep good records.
Avoid legal trouble
No matter what business you are in, it is imperative that you know the law. Understanding the legal ins-and-outs of your business can reduce the risk of unnecessary losses. If you are a landlord, this would involve fair housing laws. Setting in stone rules that all tenants must follow is an excellent way to start. The rules are the rules, no exceptions. If you begin favouring certain tenants over others, you are setting yourself up for a discrimination lawsuit.
Worth noting also is the need for a good lawyer. Listen, no one likes to think about it, but the fact is at some point you will need a lawyer. It’s inevitable, no matter how conscientious and fair you are, if you own a business you will be sued. Even if you don’t need one now, you should take the time and research lawyers proficient in your line of business. Believe me; you’ll be glad you did.
Hopefully, I have helped to shed some light on ways to manage and avoid unnecessary risks and losses for your business. Remember the more prepared you are for the unexpected in business, and life in general, the better of you will be. As always thank you for reading and good luck in your ventures.