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• Risk Management for a Small Business
• Where's The Cash?  Grants and Other Free Money

Risk Management for a Small Business

Felix Kloman
Seawrack Press, Inc.
61 Ely’s Ferry Road
Lyme, CT  06371 USA
Telephone:  860-434-2917
Email:  fkloman@aol.com
Website: www.seawrackpress.com

Managing a small business is constant uncertainty, even when things appear to be going well.  Who will buy tomorrow, next month, next year?  Will my expenses go up or down?  How will rising gasoline and utility prices affect me?  Is a falling dollar good or bad?  Will I have enough time and interest next year for the business?  What happens if one of my support staff falls ill?  Could I handle a 50% increase in business?  In a sense, uncertainty is also the lure, the excitement of a small business.  Something new crops up every day requiring a nimble response and imagination.  That’s part of the fun!

The prudent business manager and owner tries to anticipate this ever-changing variety of unexpected events, some favorable and many unfavorable.  The follow-up is to prepare responsibly for and even take advantage of them.  This process of being ready for an uncertain future is called risk management.

Yes, it’s basic common sense, often practiced in one’s head, but with the wide array of unusual situations in today’s globally connected economy, a more formal approach is helpful.  Risk management for a small business means:

• Considering all of the possible future situations or events that could materially affect the business;
• Calculating (or guessing) their likelihood, when they might happen, and their financial and human consequences, both plus and minus; and
• Developing your own responses, both current and future.

Many business owners plan to spend a few hours each year in thinking about what might happen and planning how they should respond.  Putting these thoughts in a written matrix helps to think more intelligently about what to do:

• List your assets (tangible and intangible) and resources along the side (such as owned property, bank accounts, human resources, annual revenue, customers, suppliers, community support, etc.).
• List the sources of unexpected events along the top (such as the national and local economies, irrational human behavior, natural disasters, governmental activities, technological changes, and your own commercial and legal relationships).
• Highlight those with the highest likelihood and/or the highest material effect on your business (good or bad).
• Remember that unexpected events don’t necessarily happen in isolation: they often come in bunches!
• Add a list of how you will respond right now and when and if the event(s) occurs.

Many of those responses are, again, simple common sense, while others may be new ideas, such as:

• Maintain reserve funds, such as cash in bank accounts, longer-term investments, equity in a home, a bank line-of-credit, and conventional insurance for property, liability, illness and life loss,
• Create “mutual aid agreements” with suppliers, competitors, neighbors, and friends. They promise to help you; you promise to help them.
• Use an accountant to check your bookkeeping and offer occasional counsel,
• Use legal counsel to review your work,
• Work with local chambers of commerce and similar community groups,
• Write contingency plans so that you know how to react to a special event,
• Develop a plan for shutting down or selling the business,
• Create internal controls to prevent violations of the law and to maintain product and service quality.

Being ready for the unexpected, including being able to take advantage of it, is the keystone of sound risk management for a small business.

April 13, 2008   For a more detailed workbook on this subject, see Risk Management for Small Business, by Claire Lee Reiss, published by the Public Entity Risk Institute (www.riskinstitute.org), Fairfax, Virginia 2004.

Where's The Cash?  Grants and Other Free Money

By Hugh Curley
U.S. Small Business Administration (SBA)
Connecticut District Office  – 330 Main Street, Hartford, Connecticut 06106 (860) 240-4650

People often call the SBA asking for grants or "free money" to start their business. In many cases, they have read or heard about this free money and how easy it is to get through late night talk shows or in a publication. In most cases, the information is promising, but vague and sometimes misleading. In other cases, it is close to a scam, especially when money is required to access more detailed information.

The SBA and most other funding organizations in Connecticut do not provide grants or "free money" for starting or developing a business. Although there are some grants available through the SBA, they generally are targeted towards specific groups, types of organizations, or activities.

SBA grants provided to organizations are for specific technical assistance to small business owners or, in some cases, to conduct studies and gather statistics.  These grants are part of a formal performance based agreement usually made with business focused non-profit organizations or educational institutions. As an example, SBA funded grants have helped inform small businesses how to develop and maintain a drug-free workplace. These awards went to nonprofit organizations, CCSU’s Small Business Development Center, and Women’s Business Centers who had demonstrated capacity to assist in these efforts.

Other grant programs, such as the Small Business Innovation and Research Grants (SBIR), are coordinated through SBA, but are provided by other federal agencies including the Departments of Health, Education, and Agriculture. As an example, in 2006, 87 Connecticut based small businesses received in excess of $20 million dollars for SBIR projects for the development of products identified by the government. Information on the SBIR program can be found at http://www.sba.gov/sbir.

Some state and local government agencies award grants in accordance with the extension of their mission.  One example of this would be the award of a grant for job readiness training for our young people.  These grants are most commonly awarded in the form of a contract at the end of an often highly competitive process.  Grant proposals are commonly reviewed by a board, scored on a basis of responsiveness to addressing a specific need, program quality, and the probability of achieving success as defined in the proposal, as well as the qualifications and experience of the program’s principals. Some grants provided by state or local governments will be incentives for existing companies to locate, expand or maintain and educate the workforce in Connecticut.  These, increasingly rare, awards are often an offset of property tax increases or reimbursement for specific job training expenses.  The best source of information on these is the CT Department of Economic and Community Development www.ct.gov/ecd.

Lastly are grants provided by private foundations or charitable organizations.  To get a better understanding of the mission and activities of particular non-profit organizations and foundations, contact the individual foundation or search with the assistance of internet based databases such as www.guidestar.org.

If asked the question: "Are grants available to assist small businesses in Connecticut?”,  the answer would be a highly qualified yes. However, grants to individuals in Connecticut who would use the proceeds to start their own "for profit" small business are indeed rare.