The art of lowering financial risk is not as hard as some people put it to be. It is the duty of every CEO or business owner to master this important art, to keep the business in a sound financial state. Mastery of this art begins by rectifying some simple financial mistakes that businesses make without knowing that they are of great financial risks. Below are five financial risks that every business should avoid at all costs.
Financial risks that should be avoided
Never underprice your products/services
One of the greatest mistakes that business owners make is to underprice their solutions. It is a common occurrence for many businesses to get into the market with unimaginably low prices for their solutions with the aim of setting themselves apart from other businesses in the market. However, the problem comes in when the cost of operations increase and the need to increase the price of solution emerges. It gets hard to increase prices because it will offend loyal customers. Therefore, a business will suffer losses due to this financial mistake.
Don’t hire until you get funds
Another common financial mistake is hiring employees with promises and no money in the bank to pay them. By the time you are hiring employees, you should have enough money in the bank to pay them so that you do not run into financial trouble with your employees.
Never borrow money you don’t need
At a chance of getting a business loan, a majority of business owners will go for the loan even if they do not have a plan for it. Loans always seem sweet until you realize that paying off is hard when you did not invest it wisely. Therefore, try as much as you can to avoid borrowing money if you do not need.
Don’t depend on a single revenue source
In as much as your business may specialize on a single product/service, you should not depend on that as your single source of income. You should look for an alternative source of income for your business to avoid running broke. This is an important tip that all top financial advisors give as word of advice to business owners.
Don’t fill too many positions
As a financial tip, you should only employ employees who are directly adding value to the business. Overhead positions have a negative financial implication and thus the need to regulate overhead positions in the business.
Avoiding these five financial risks is the first step to mastering the art of lowering financial risk in business.