This past year was one of the most challenging in recent memory, throwing endless curveballs at startups and small businesses everywhere.
They say that whatever doesn’t kill you makes you stronger, but it’s better to avoid deadly threats in the first place. Knowing what to look out for in 2021 will help businesses thrive in the new year. While some difficulties are impossible to predict, here are some risks that you can prepare for.
1. Supply Chain Disruption
If your supply chain is disrupted, you will have a hard time keeping operations going. No matter how great your marketing strategy or product development, you’re stuck if you can’t obtain materials or make shipments.
Plan now to avoid future supply chain emergencies. Audit your supply chain to identify weak spots, and seek out backup suppliers where you spot vulnerabilities. Keep more inventory on hand than you normally might. You can also use an AI-driven risk evaluation tool to monitor and address potential disruptions and shortages.
Another way to safeguard your supply chain is to take advantage of group purchasing. Group purchasing organizations can give you access to hundreds of pre-negotiated contracts, thus expanding your base of potential suppliers. By banding together with other businesses, you’ll also qualify for bulk discounts on the materials you already purchase.
Every passing year, cyberattacks become a bigger threat. As the role of technology grows in society and business, so will the number of hackers and malicious users looking to take advantage of insecure systems. If you don’t already have a cybersecurity plan in place, implement one in 2021.
Begin by teaching your staff fundamental cybersecurity principles — the weakest link is often the human one. Employ a firewall for your internet connection, and make sure you have (and regularly update) antivirus and anti-spyware software on all your computers.
Take advantage of the Federal Communications Commission’s cyberplanner tool to craft a security plan that meets your business’s needs. Keeping company and customer data secure should be one of your highest priorities.
3. Reduced Access to Capital
When the pandemic hit, stay-at-home orders and customers’ reluctance to venture out took a huge toll on small businesses’ cash flow. Numerous loan and relief programs were established to help struggling businesses finish the year, but many of these have since ended.
Unfortunately, there are signs that banks are also cutting back on lending to small businesses. This restricted access to capital means that there are fewer safety nets for companies in 2021.
Fintechs may help fill the gap, but if you can avoid taking out a business loan in 2021, you should. Shelve your big-ticket plans for now and focus on more organic growth that doesn’t require a trip to the bank.
4. Productivity Loss
Covid-19 has affected more than supply chains and cash flow. The disruption to normal routines and the mental health impacts of the long-running pandemic have impacted employee productivity. A recent Fortune article argued that the biggest business risk at the moment is grief.
To rebound in the year ahead, prepare to invest in the productivity of your employees. Their contributions are crucial for your company’s resurgence following Covid-19 and throughout 2021.
One silver lining is that work-at-home policies forced on us by Covid have not harmed — and may even have improved — employee productivity. Continue to offer remote work opportunities to boost employee morale and motivation and provide the tools necessary to optimize the “new normal.”
5. Low-Quality Hires
Prior to Covid-19, the U.S. was seeing record levels of employment, with numerous job opportunities and a shrunken talent pool to hire from. The coronavirus flipped the script on employment.
Numerous companies went under or drastically cut back the size of their teams in an effort to stay afloat during lockdowns. As a result, unemployment skyrocketed.
Now, businesses have a hiring dilemma. You may think you have the upper hand when it comes to recruitment and onboarding, and that may be true. Building up too quickly, though, could result in high turnover or low-quality hires, both of which can disadvantage your business.
6. Changes to Consumer Purchasing Power
No company can run without paying customers. Consumer needs and ability to pay will fluctuate, especially following a tumultuous 2020. You’ll need to prepare for these changes to enable your business to thrive.
Take the economic landscape into consideration. Can your target market still afford your products? Can you roll out products they need and can afford? If the answer to these questions is no, your company is at risk.
7. Political Polarization
At this time of deep ideological division, nearly any company statement or action risks stepping on a political landmine. What your company says, or doesn’t say, about its beliefs and values can make or break its success.
Think carefully about the message your company sends with every decision, press conference, and marketing campaign. Above all else, be honest. Don’t pander to particular demographics with half-truths: Mean what you say and say what you mean.
8. Policy Changes
With new leadership comes new policy changes. Whether at the federal or local level, the most recent elections have definitely shaken some things up. While policymakers may mean well, certain policy changes can put your business at risk.
Treasury Secretary Steven Mnuchin’s proposal to shut down the Federal Reserve’s emergency Covid-19 relief facilities, for example, may put an even tighter squeeze on business lending. New trade deals could change the availability and price of resources you may need to do business. Keep an eye on these policy changes so they don’t blindside you.
9. Natural Disasters
The occurrence of natural disasters is steadily increasing, along with the economic damage they cause. Maybe you can’t move out of a hurricane zone, but you can increase your chances of business survival through disaster recovery planning.
Prepare an evacuation plan to ensure the safety of your most precious assets: your employees. Likewise, protect vital business records by securing them in a fire- and water-resistant safe and/or storing backups in the cloud.
Next, make sure you have adequate insurance coverage for the risks you face, and keep your policy information and contact numbers at hand. With these measures in place, you can hope to rebound.
10. Asset Bubbles
An asset bubble occurs when an asset skyrockets without justification, leading to unstable growth. When the bubble pops, demand-supply equilibrium is thrown off balance, sending the economy into a slide that’s difficult to control.
Covid-19 may have caused some asset bubbles to form, such as in the red-hot housing market. Make sure your company is diversified enough that the sudden rise or fall of certain assets doesn’t throw it into a tailspin.
A successful business is led by careful and informed individuals. Take the time to assess your risk management plans and prepare your organization for any threat that 2021 may present. With good preparation, you have nothing to fear.