Question

Describe and discuss the dangers of small businesses. • Identify the top three reasons YOU think small businesses struggle. • State your reasoning behind your selection of the issues. • Present your ideas for dealing with those issues.

Answer 1

In today’s environment, running a small business is always fraught with danger. Often they do not have the resources and expertise that larger businesses have. As a result, small businesses are more vulnerable compared to their larger competitors. Some of the dangers of running a small business include:

· Inability to minimize economic risks: Any business can be impacted by macro and micro economic conditions. To counter these risks, larger businesses often diversify into multiple geographies and products. However, smaller businesses are limited in their reach and product offerings. Hence their ability to deal with a severe economic downturn is limited.

· Compliance risks: Businesses are liable to comply with several local and federal rules and regulations.

· Financial challenges: Any delays in receiving amounts from customers or delays in paying off debt can pose a challenge to the business’ cash flow.

· Competition: Often the barriers to entry for small businesses are low. This can result in increased competition if the business is unable to differentiate itself.

The top reasons small businesses struggle is because of the following reasons:

· Reputational risks: A competitor spreading rumours or a customer posing negative feedback can quickly wreck the reputation of a small business. To deal with this issue, business owners need to manage their reputation online and actively talk to all of his stakeholders.

· Employee lawsuits: Employees can file sexual harassment cases, accidental claims, wrongful termination etc., which can pose legal challenges. Adequate insurance policies can protect the business owners from these risks.

· Any force majeure event: A severe force majeure event, such as fire, earthquake, typhoon, etc. can permanently wreck business operations. The business owner should take adequate insurance cover to recover his losses.