One of the things it’s most important to understand about your business is what the risks are. This doesn’t mean you need to be governed by fear of those risks – growth, development, success all require pushing outward into the unknown – but you do need to know what they are, to make calculated decisions about what is and isn’t worth risking those dangers.
Today we’re looking at some of the risks that can threaten a business’ future so you can make informed choices about how to proceed.
The Competition
One of the risks you need to be constantly aware of is the one posed by others operating in your industry and locality: rival businesses! They’re in direct competition with you for customers, for marketing space, for products, raw materials and local logistics.
One thing it’s important to understand is the scale of the risk, which is largely dictated by how close you are to the ceiling of your market – how many customers there are with spending power that isn’t yet fully committed. If there are customers out there to claim, you’ll have a much easier time, however many rivals you have – think about how quickly streaming services have proliferated recently, as broadcasters compete to claim customers before the market is fully matured. On the other hand, think about how hard it would be to launch a new national grocery store chain, when the vast majority of people in the UK are committed already to either their local shop or an existing brand.
Commissioning some competitor intelligence can help you understand what’s happening with your competition, and plan around the risk they represent.
Changing Tastes
Customers will choose your brand for all sorts of reasons, and one significant risk is that factors affecting that choice are going to change and you can’t control it.
Look at the UK’s building cost of living crisis – it’s out of the hands of any business owner in the country, and they can only watch as household budgets are recalculated to ensure the essentials can still be afforded and luxuries are discarded.
As well real-world economic factors, taste can be hugely important. Some brands are built off a fad that can be all consuming for six months, and then fit for nothing but nostalgia – many toys work like this, where Christmas’ most desirable gifts would be woefully behind the times by Easter. If you’ve over committed to a fad and are still trying to shift stock when it’s passed then you find yourself worse off than if you’d simply never tried.
While you can affect neither vast economic movements nor customer’s sense of taste, you can pivot your brand to react – either emphasising the value of your proposition to make it more attractive in harder times, or to reflect current trends and stay relevant to customers. To do this you need to know what your customers are thinking and what they’re influenced by – in short, market research. When you have the data to understand what your customers want and predict how they’ll react you can meet their needs better – and avoid the risks of not meeting them!