Once a company is up and running, it tends to stay in operation until some occurrence prevents it from continuing, businesses don’t stop working for no reason. Though occasionally they suffer a slow decline to closing, more often a firm’s shutdown is the result of an internal or external misfortune that compromises the integrity of the operation or starts a chain reaction that leads to collapse. The greatest tragedies to hit your business are as follows;
Cash flow interruptions; businesses need cash to survive; it’s what you use to pay your employees and your bills, and generally keep the lights on. If your cash flow runs into the negative, sooner or later your entire operation will collapse. This seems obvious, but many startups end up facing cash flow problems they didn’t anticipate. This is because cash flow is a bit different from bottom-line profitability. It requires you to pay careful attention to your cash inflows and outflows at all times. Even if your business is making money on paper, an unexpected expense, a customer who won’t pay on time or a drop in expected revenue could send your finances into a downward spiral.
Personal injury lawsuits; personal injuries in the workplace are probably something you won’t anticipate. They don’t have much to do with your daily operations, especially in a non-industrial or non-manufacturing setting, but they can still happen anywhere, at almost any time. It’s possible to lower your risk of this by establishing stricter, more comprehensive safety requirements, insisting on a protective waiver or similar legal document for your customers, and even obtaining litigation insurance. Together, these measures will make your company less vulnerable to most unfortunate encounters here.
Intellectual property lawsuits; most businesses don’t think much about intellectual property lawsuits because they would never intentionally plagiarize another company’s material or deliberately employ an asset without permission. This can be an unexpected disaster; however, because it usually occurs when your business didn’t realize what it was doing was wrong. Such lawsuits can cost a lot of money, so verify your work multiple times to ensure you’re always using intellectual property appropriately.
Fraud; fraud can come in many forms, and chances are you’ll never see it coming. It’s unlikely that your business would be defrauded at the higher levels, but when you’re first starting out, you could be vulnerable to fraud in the form of a misleading customer interaction or a partnership that doesn’t pan out. As your firm gets bigger, you’ll be less susceptible to these potential fault points, but you’ll still be vulnerable to internal forms of fraud; no matter how much you trust your employees, someone may still end up managing your money fraudulently or stealing from your business in other costly ways.
The greatest tragedy that can befall any venture is an irreversible falling out between its founders. The venture may have huge potential but if the team falls out then all is lost. This value destruction can occur in a trice. Most team disintegrations occur more slowly as resentments build and relationships crumble. It is believed by statistics that half of all startups fail within their first five years. In any given year, among firms with employees, almost as many firms close or go bankrupt, as there are new startups.
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