How to Survive Small Business Startup Risks

Why do small businesses fail?

Canadian small businesses face a serious test of survival in their early years. Recent Statistics Canada data shows that almost two-thirds of small businesses with revenues under $30,000 fail within five years of their start-up.

Why is this? In daily discussions with small businesses, I’ve learned that they are confronted with a myriad of ever changing risks. Some risks are more visible than others. Business owners typically focus on external risks that include market changes, competitive and regulatory activity, rising costs, and funding shortfalls.

However, according to Statistics Canada, almost half of the small businesses that fail do so because of internal skill-set and experience deficiencies. Most small businesses in Canada are unprepared for the following types of operational risks and managerial issues:

  • Loss of intellectual property – loss of key personnel
  • Service and quality degradation and inconsistency
  • Inadequate operational and financial controls
  • Decision-making “bottlenecks” – delegation constraints
  • Information “silos” – inconsistent or incorrect understanding of business policies, procedures, priorities, and values
  • Performance management and assessment constraints
  • Recruitment and training constraints
  • Business scaling and growth constraints
  • Potential business interruptions (downtime or inability to meet customer commitments)
  • Potential damage to business credibility and reputation

Fortunately, many of these business risks can be mitigated in a comparatively simple and cost-effective manner. Defining and documenting your day-to-day business policies and procedures provides a very effective insurance against these risks.

Documentation ensures that your hard-earned business knowledge is protected, shared, and levered more effectively. It also provides important strategic advantages for future business growth, franchising, third-party investment, and business sale opportunities.

On-line business documentation, including wikis, offers a number of additional benefits including enhanced accessibility, maintainability, ease-of-use, keyword searching, dynamic cross-referencing, and multi-media support.

Whether documented in-house or through a documentation consultant, the documentation process begins with a business risk assessment to prioritize your process definition and documentation requirements. Business risk should be evaluated in terms of both its probability and severity. This allows you to prioritize and focus on high-value and high-use documentation.

The documentation process also serves to raise your awareness of potential business workflow and process control gaps which can then be simultaneously defined and documented (e.g., customer service policies, financial controls, and disaster recovery plans).

Business documentation is critical to empowering your staff and management so that business operations and growth are no longer held hostage by your day-to-day availability. You should reassess and reprioritize your business documentation requirements if you want to build a credible, scalable, and profitable business.