7 Substantial Risks for Brick-and-Mortar Businesses
Being able to start your own business is a dream many Americans hold dear. It offers a sense of autonomy, in which you may be free to choose your own work hours as well as be in charge of the tasks.
It also holds the potential for profits, possibly much more than you were able to earn in your nine-to-five job. As you work toward starting your brick-and-mortar operation, however, you should keep an eye on the risks associated with the venture.
There can be higher risks involved with a physical business compared with an online firm. That’s probably one of the reasons so many people are launching online businesses right now.
Still, more and more online outfits are turning to brick-and-mortar retail for the higher profit potential, which is what makes the risks more palatable. Being aware of the risks your business could face simply means being prepared to handle the negatives if and when they strike.
If you’re about to open shop, here are the risks you should be aware of.
- Financial Investment
Most brick-and-mortar companies require a substantially greater financial investment, primarily because of the operating costs. You must pay rent or a commercial mortgage, utilities, salaries for sufficient employees to staff the premises, legal fees, the proper business licenses, property taxes, and so much more.
A financial investment of this magnitude may not be an obstacle, though, if your business plan projects that you could be profitable within a reasonable time period. Be smart with your finances, and don’t go after investments that aren’t likely to render a return.
- Personal Injury Suits
Health and safety conditions on your premises can be constant concerns when you run a physical business. You never know when someone might get hurt — or claim an injury — on your property and sue you for the damages.
Though compensation for an incident on your property might be justified, the process can be lengthy and costly. Protect your brick-and-mortar store with adequate insurance. When you’re hit with a lawsuit of this kind, the insurance may well save you from financial ruin.
- Environmental Concerns
Opening a shop in a region where natural disasters such as hurricanes, tornados, winter storms, earthquakes, floods, etc., occur frequently entails higher risk than in a region where such events are less common, of course. A single disaster could destroy your property and all the goods and equipment inside, possibly beyond repair.
Are the chances of a natural disaster worth the potential profits in your region? If you decide they are, be sure to obtain adequate insurance that won’t short-change you in the event of a catastrophe.
- Political and Economic Instability
You might have tight control over your financial house and inventory, but economic and political developments in the background can affect your potential success. For example, your decision to support a political party or a legislative proposal could mean a hit to your business or lowered profits if vendors and customers object.
A hike in interest rates or a sudden drop in the stock market could also hurt your profitability. Political and economic unrest is unpredictable and sometimes difficult to respond to when things go south.
The best you can do is to keep your nose clean and avoid making unwise investments in case the economy takes a dive.
- Employee Risk Management
Employees are a necessity in a brick-and-mortar operation, so an employee risk-management strategy is essential. Your store must be manned and secure at all times, which means adequate staff that have up-to-date skills.
Unfortunately, workers can also be the chief factor in security breaches, both digital and physical. Dissatisfaction, negligence, and just plain ignorance may all lead to costly breaches, which can be expensive and difficult to redress.
Proper training and screening processes can help you avoid these kinds of problems. You can’t control everything your employees do, of course, but your attention to solid management will make a big difference.
- Compliance Risk
This is especially poignant for business owners in the health and food sectors, but compliance applies to every company in some way. Depending on your industry, you’ll face certain health, safety, and privacy requirements that must be respected or government officials could shut you down.
You have to know the regulations and requirements for running your type of business. Having a consulting attorney or compliance officer to advise you can help to avoid critical errors when you’re starting out.
- Reputational Risk
This is an often overlooked, but potentially deep-biting risk. Since word-of-mouth marketing is regarded as the most effective method of spreading your business reach, it’s also inevitably one of the most effective ways of spreading inaccuracies and negative publicity, whether warranted or not.
A competitor might spread nasty rumors about your business; a negative customer review could damage acquisitions. Keep tabs on what people say about your business and have a plan to repair damage.
Your reputation management strategy could mean the difference between success and failure in the brick-and-mortar landscape.