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Preparing for the Worst: How to Make Sure You're Ready for Unforeseen Bumps in the Road

Evyatar Sagie
Evyatar Sagie

It is critical you are prepared to handle any issues that come your way.

"Hope for the best and prepare for the worst" – wiser words were never spoken when it comes to maintaining a sustainable business.

As a small business owner, being your own boss has many benefits; you get to call the shots and make all the decisions. But it also comes with a lot of responsibility, and risk management is one of the most important responsibilities you'll be shouldering.

As you probably know, running a business always involves a certain level of risk. That's what makes entrepreneurship such a leap of faith. With a little foresight and smart planning, though, you can reduce those risks – or at least create a solid plan for dealing with them to minimize the negative effects they may have on your business or your income. Small business risk assessment is an essential part of setting up and running your business, and you should make sure to give it some consideration.

Possible risks

These are some of the risks involved in running a small business.

Financial risk

No matter how well you plan, there is always a risk that the business won't run as well as you hoped. You may not be able to find as many clients as you anticipated, or your return on investment may not be as high as you predicted. You might encounter an unforeseen expense that depletes your budget or face issues with cash flow. According to a U.S. Bank study, 82% of businesses fail because of cash flow mismanagement

Property loss or damage

Many entrepreneurs need specialized equipment for the work they do, and that equipment can be expensive or hard to replace. No matter how carefully your guard your property, there's always a chance something will break or get stolen. Another type of property that may be damaged is intellectual property. If your business is based on innovation or uses unique materials in its services or products, and that material gets leaked or copied, your business can suffer mightily.

Injuries, illness or loss

One of the biggest risks of being self-employed is that if something happens that puts you out of commission, there's no one to jump in and replace you. If you employ a team of workers, something could happen to a key person on your staff. They could get hurt on or off the job, or come down with an illness. In the worst-case scenario, they may even die suddenly.

Business interruption

As the result as the above or other circumstances beyond your control, you may find yourself in a situation where you're unable to continue running your business as usual. Maybe you need to replace stolen or damaged property, or find a replacement for a key person on your staff. The interruption to your business means you're not getting any income while things are stalled. It also may result in you missing out on landing new clients who see that you can't help them and move on to the next business.

Damage to reputation

Good public relations are essential for continuing to market your product or services. If some unflattering information about your business spreads – whether or not it's true – it can cause significant damage to your company, because old clients may choose not to come back to you, and new clients may not approach you at all. This may happen as the result of a client being unhappy with your service or product and posting a bad online review or telling their friends about their negative experience.


Even the most careful professionals might find themselves being blamed for damages that may have been related to their work. Everyone makes mistakes, and there are always things beyond your control. Some customers might be more understanding, but some might decide to sue. Even if you win the case and don't end up paying damages, a lot of the time and energy you could be investing in running and growing your business will be eaten up by the court case.

How to combat risks

1. Prioritize customer service.

Study after study has shown that the most effective way to reduce the risk of getting sued for medical malpractice is to spend more time talking to your patients. This research shows us something really important: that no matter how well we do our job, it is our treatment of the customer that predicts how happy they will be with our service. If you have a good relationship with your client and you make a mistake, that client is much more likely to forgive you and give you another chance or work out a settlement that is fair to both of you. "The customer is always right" isn't just a cliche; it's an effective risk reduction strategy.

2. Keep files in order.

You can avoid many problems by establishing and maintaining a system for keeping all your files and records in order. There's often a ton of paperwork involved in starting and running a business, and you want to be able to find what you need when you need it. It's best to develop this system right from the start so you don't have to reorganize a mess of files later on. Keep your records of everything – expenses, purchases, income, insurance information, contracts, licenses, etc. – in a safe place, and preferably back them up online. If you have insurance and need to make a claim, you want to make sure you can find all the documentation you need.

3. Perform a thorough risk assessment.

Identify all the risks that may apply to your business, and make a plan for what to do in each worst-case scenario. Ask all the scariest what-ifs. What if your equipment stops working? What if you get sick and can't work for a while? What if you make a mistake and your client sues you? Make a list.

4. Walk yourself through these worst-case scenarios.

Make a concrete plan for addressing each item on your list. Did a key employee suddenly quit? List some ways you can cover for them until you find a replacement. Is a client unhappy with your service? Think about compensation plans, and leave some room in your budget for them. What if a natural disaster strikes? Know your insurance policies well, and be familiar with what would be involved in making a claim.

5. Be properly insured.

Having good insurance is the best answer to many of the what-ifs on your list. General liability insurance, for example, is a must. It can cover you legally and financially in situations where there's an accident or a mishap and your business might be blamed for it. For many professions, professional liability insurance might also be important. It adds another layer of protection in cases where you make a professional mistake. If you use a vehicle for business purposes (such as delivering products, driving to meet clients or transporting equipment), it's a good idea to get commercial auto insurance too. If you're an employer, you are likely legally required to have workers' compensation insurance.

Image Credit: Undrey/Shutterstock
Evyatar Sagie
Evyatar Sagie Member
As Head of Acquisition at insurtech company Next Insurance, I specialize in performance-based marketing through a variety of online channels. I have worked in companies spanning the tech world, from e-commerce through to travel, personal finance, and insurance. With skills garnered in my 13+ years of experience in online marketing and growth hacking for these diverse companies, I now lead Next Insurance’s acquisition efforts to create a global brand.