You take a risk when founding a business, and you take an additional risk not knowing its value. Routine business valuation verifies your company’s worth and identifies those corporate traits that enable you to make informed business decisions to focus on growing the company.
Once the valuation is done, what should the savvy business owner do next?
After the Valuation
Valuation of your company indicates where your company stands, what it’s doing, and where the business is going. Effective business valuation gives you a clear picture of gaps in business value and provides insight into key performance indicators and fundamental value drivers. Knowing where your company stands and its market value allows you to set objectives to measure its growth and losses.
Focus on Your Strengths, Eliminate Your Weaknesses
Identifying strengths and weaknesses in your company helps build a stronger foundation. An owner must be aware of where the business is going and the potential risks it may face. Being prepared is the best way to deal with potential risks. Making positive changes within the business and turning negative traits into positive ones will increase your business’ value. One of the best outcomes of a business valuation is understanding and eliminating the risks associated with your business.
Your business’s strengths are your capabilities, which help develop a competitive advantage. Healthy customer relationships, a stronghold on brand recognition, excellent and unique technology, a diverse workforce and customer base, and a good market value can change your game for the better.
Weaknesses may stop you from achieving your desired results. For example, a poor management system, low customer response, high debt, high employee churn, and a lack of workforce diversity are weaknesses that slow down your company’s growth.
How to Identify Business Risks
Businesses thrive when they have a balance of strengths, weaknesses, opportunities, and threats. When all four are reviewed and carefully addressed according to what the business needs, what needs to be improved, and what needs to be eliminated, the company grows to its full potential.
A SWOT analysis will direct your business strategy by assessing all aspects of your business to show you its strengths, weaknesses, opportunities, and threats. By writing down a list of all these aspects, you can compare, question, add, or eliminate them to grow your company.
Other benefits of a SWOT analysis include:
- Pinpointing problems and resolving them
- Using resources effectively to reduce redundancy
- Improving operations
- Figuring out new opportunities
- Identifying risks and working on them to improve performance
- Making all the necessary changes to increase the value of the business and competitive standards.
Types of Risks Faced by Businesses
Economic risk due to changing market conditions. The COVID-19 pandemic delivered severe economic and market fluctuations, resulting in drastic changes in the business world. However, the constantly evolving economic environment has trained us to look at opportunities in a better light. To maintain a steady cash flow, one must be watchful of trends and new market practices. When you know what is happening in the market, you can make mindful decisions and shield your business from economic risks.
Compliance risk. Entrepreneurs often face the threat of fines and penalties arising from copyright violations or regulations they fail to comply with. Therefore, stay updated on government policies and laws. Legal battles are costly and take a long time to settle. Better safe than sorry.
Security and fraud risk. With the rise of cloud technology and the rapid growth of innovative solutions for online payments, there is a higher risk when it comes to data maintenance and security. With the rising cases of Identity theft, data loss, data breaches, counterfeiting, and corruption, we must be aware of possible security solutions. The owners and employees must be professionally trained in risk management. Organizations control fraud prevention and detection, which is possible through risk analysis.
Financial risk. When a company’s income is generated through accounts receivable, it faces financial risk, particularly when one company extends credit to another. A delay in payments results in a loss on principle. Legal fees increase the financial risk if a firm needs to take action against a debtor for failing to pay. Diversify with multiple revenue generation sources to help you overcome loss through profits from other sources.
Reputation risk. Adverse publicity, negative reviews, disputes, unhappy customers, and more question your integrity and jeopardize your good reputation, something you need to remain competitive in the market. Monitor your online and offline presence; see what people say about you and what your customers like or dislike about you, and work toward forming a sustainable bond. Be ready with effective responses and a team handling negative publicity or lawsuits. Deal with things with an open and positive mindset.
Operational risk. Anything that affects your business physically can be considered an operational risk. An operational hazard may occur through natural causes like earthquakes and fire, while other issues result from equipment failure and power cuts. Anything that stops your productivity is a risk. To deal with it, train yourself and your team. Offer training programs to update employee knowledge, deal with accidents in the workplace, and regularly check backup systems and equipmentÂ to prevent accidents.
Competition and comfort risk. You may know your competitors, but do you know what they might be planning next? Every business owner wants to grow their customer base, even if it means stealing their rivals’ customers. As a growing business, you must be aware of the best practices that appeal to your customers, keep yourself updated on new trends, and maintain originality in your services. In addition, you must perform regular quality checks, refine your strategies, and keep an eye on what your competitors are doing.
How Can We Help?
These days, a business must evolve at a speed like never before. The right way to grow and add value to your business is by monitoring your performance and deciding on where to improve.
As a business owner, plan your strategies to save more and use your resources efficiently. Our experts at Quantive know how to help you achieve your desired results.
Connect with our advisors today and take the first step towards unmatched success.