Affordable Risk Management Strategies For Small Businesses

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Affordable Risk Management Strategies for Small Businesses

by Beth Taylor

Starting a business is a risk. New business owners and small business owners put their life and soul into their work. They also often invest their own capital. There is everything to gain when the business is successful, but there is everything to lose when accidents happen or problems are not recognized early on. Affordable risk management strategies can save a small business.  

Write a Business Plan

Every business needs a business plan. A business plan outlines all operating expenses and how money is made. Business plans attempt to forecast how many years it will most likely take to reach a desirable profit margin. Business plans can and should be edited as new information becomes available or as circumstances change.

Business plans contain clues to potential risks to the business. Referring to the business plan on a monthly basis minimizes risk because business owners may compare the projections in the plan to how the business is really doing. Recognizing trying to fix problems early prevents much larger problems from forming later.

Loss Control

Loss control equals prevention. One way to prevent or control losses is to train employees well. It is less expensive to take the time to train and test employees than it is to pay for an injured employee or damaged equipment. Invest the time to ensure all workers understand their jobs and what is expected of them to reduce risks to the business.

Alarm systems and security cameras are also loss control strategies. Deterring break-ins and theft is, in the long run, cheaper than recovering from theft.

Sprinkler systems are a necessary loss control strategy if the business works with flammable substances. Anything a business owner can do to prevent injury, damage, or theft is good risk management.


Every business needs capital to cover operating expenses, and this is a problem for new small businesses that have not had time to grow. Some small business owners fund the business with an unsecured credit card, but the interest rates are high.

The Small Business Administration (“SBA”) is a federal agency that offers low-interest loans to small business owners. To apply, business owners must present a well-written business plan. The SBA helps many small businesses get a good start with low risk loans.

When applying for loans and appealing to investors, it is best to monitor the market and test small batches of product when possible before seeking large chunks of capital. After getting a reasonable idea of just how much potential for gain there is in market, approach investors and ask for what is necessary. Being able to give reasonably accurate estimates of what must be spent and how much may be made reduces some of the risk to the business.


Insurance may seem expensive, but it is necessary and it will prevent financial ruin in case the unthinkable happens. In addition any insurance legally required by the state, consider insuring any business machinery or expensive equipment. Note that homeowner’s insurance seldom covers work related losses when the business is run out of the home.

Businesses that manufacture or sell products purchase product liability insurance packages to protect themselves from lawsuits.

All businesses take on a certain amount of risk. Careful planning and referring back to the business plan may help minimize business risks and financial losses. 


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