Mastering Risk: Tools and Techniques Every Sustainable Entrepreneur Needs

To successfully grow a business, you need to sustain enough cash flow to keep it viable
That may be straightforward enough in principle, but in practice this requires careful consideration and monitoring of a multitude of factors.

Some entrepreneurs will choose not to expand, knowing that doing so may incur extra risks. Others may rush to grow bigger and bigger, without proper investigation of the potential threats.

Yet those who are most likely to be successful are those who recognise the risks and methodically work through them to mitigate as many as possible. It is only once that process is complete that an entrepreneur should be comfortable to proceed with a new project, knowing they have increased the probability of success.

Expansion risks
The risks of expansion can be broadly split into five key categories: market, entrepreneur/team, financial, legal and operational. With each that you manage to eradicate or reduce, you tip the scales in your favour that little bit further.

The performance and durability of any technology you use within your business is a prime example of an operational risk: without reliable tech you may find orders delayed, products not meeting quality standards, or even your entire operation being shut down for a period of time while repairs are made.

That’s why an assessment or test by a reliable third party of any new technology you plan to implement as part of your growth plan is essential. If you are already working happily with a tech partner, then you have a distinct advantage, in that they can help you to seamlessly integrate your new project alongside ensuring continuity of your existing operations.

Utilising AI
If you’re one of the 85% of businesses which has not yet implemented any AI, according to the UK Government, then it is definitely time to consider how its use could help mitigate many risks.

Used successfully, AI can help identify strengths and weaknesses among your competitors; customer preferences; and existing patents and trademarks for products similar to yours. It can also minimise some of the work involved with operational functions – giving your team more time to focus on their areas of expertise – and generate draft content for everything from your marketing materials to your legal contracts.

Of course, while AI is valuable for identifying consumer trends, you also need to put in the work to understand your target customers before implementing your growth plans. A process of ‘deep listening’ is required, learning from reviews left for your business and your competitors’ businesses too; approaching them directly for detailed feedback; and asking existing customers to try out the new products or services you intend to launch.

Is there a market?
All of this helps mitigate the risk that there simply isn’t a market for your new project, or that there are stumbling blocks in the way (like quality, price or distribution network) which will lessen the chance that customers will purchase from you.

After all, if no one is willing to buy from you, then your expansion will not be a success and may even jeopardise your existing thriving business. You need to fully understand the market risk including demand, competition and economic aspects. And if your growth plans will see you venturing into international markets for the first time, which 28% of businesses are aiming to do within the next three years (Santander UK’s Trade Barometer), there is even more work to be done to understand any potential problems.

Can your existing distribution partner support you within the new regions you hope to expand into or, if not, is there a reliable alternative? Do you understand all of the regulatory frameworks and trade policies overseas? And how will you ensure you build relationships and loyalty with customers in the new markets?

Ensuring success
The level of risk mitigation you have already taken to ensure continued cash flow and business sustainability to date must continue whenever you think about growing to the next level. Do not simply let yourself get swept away with the idea that expansion is something you must do as the natural next step; take the time to systematically list every single risk within those five categories (both tangible like financial loss and intangible like reputational damage) and work out strategies to minimise or eradicate each one.

Because without doing so, you risk not only your new project failing, but also your existing business being damaged as a result. The tried and tested way towards success and sustainability as you grow is becoming a risk-efficient entrepreneur.

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