Scaling up happens gradually as your business grows. It’s rarely an overnight “big bang”. And due to the progressive nature of change, sometimes it can be tricky to realise that your risk profile may have evolved and the protective measures that were suitable for a start-up may no longer suffice.
As an entrepreneur, you have to take care of endless nameless tasks. Looking at the risks and documentation may be further down your priority list. However these mundane tasks will pay off in the long run. They will create a more stable foundation for your business, including your relationships with customers and suppliers.
Here’s a simple (not exhaustive) checklist of things that could help to mitigate business risks.
Due diligence on existing customers and suppliers
Over the years of trading, you have known which relationships work and which don’t. There could be a client who never paid on time or cost you more to maintain the relationship with minimal returns. There could be a supplier who delivered subpar work that resulted in your breach of a service commitment with a client. Or simply you no longer provide or require certain goods or service lines. It is time to end the redundant business relationships properly and replace them with more suitable ones.
Due diligence on new customers and suppliers
Aside from the standard, public information about your potential client or supplier (such as company details, credit rating or trading history), your knowledge of what works for your business is invaluable. That insight should be the starting point for any discussion about a new business relationship. Drawing on this insight consistently will help you build a stronger, more reliable business network and reduce the cost of relationship maintenance.
Whatever stage you are at, formal contracts with suppliers and customers alike are just good business practice and will avoid unexpected disagreements blowing you of your scale up course further into your journey. This is absolutely essential where it concerns a supplier who you rely on to deliver your product or solution to your customers.
As the volume of contracts grow, it’s worth considering the creation of a set of standard terms and conditions for customers and suppliers, as well as negotiation guidelines. This will help to establish your risk baseline across different deals and help reduce the cost and effort of contracting. If you already have those standard terms in place, then you should review and update them to make sure they still accurately reflect your business practice and risk appetite on a regular basis.
Depending on the solution or product you offer, you will need to make sure you comply with industry standards and regulations as well as any key customer policies. For example, if you deal with consumers, then you must comply with consumer regulations. If you provide a fintech solution to financial institutions, they may ask that your system be ISO or PCI compliant. Some bigger customers may ask you to abide with their policies (e.g. data protection, information security or business continuity) and you should consider whether it is possible to meet such requirements and whether that affects your performance commitments to other clients.
Obtaining appropriate insurance policies is one of the key measures to managing business risk. These shouldn’t be viewed as a tick-boxing exercise to comply with regulatory requirements. The insurance coverage and limit should match your business and the risks that you need to mitigate. To illustrate, a bespoke cyber security insurance may be more relevant to a SaaS provider than a grocery retailer. Note that insurances will not only help to shoulder the cost if things go wrong, they may also be required by your customers. You should also look at your suppliers’ insurances to make sure that they are appropriate to back their obligations and risks.