Small businesses, especially startups, can fail for a variety of reasons. Underfunding, poor management, and poor planning are just a few of the common mistakes that bring about their downfall. Little or no investment in cyber security is yet another potentially fatal mistake. This happens because new entrepreneurs may either underestimate the risk of becoming victim or fail to appreciate the full extent of the consequences. Poor cyber security is precisely why criminals target them. And unlike many common problems, a data breach isn't easily fixed. It incurs serious costs that can permanently close the doors of a business. Here are four of them:

Business Disruption

A cyber attack that compromises a company's data may also take down its systems and slow its operations to a crawl. Should such an attack happen during a period of peak customer demand, the company can lose a substantial percentage of its yearly income. If the attack affects the company's website, search engines such as Google, may blacklist the site if their scans reveal harmful behavior. The resulting web traffic loss can seriously diminish online sales and lead generation.

Lawsuits

Customers whose data was stolen, may file lawsuits against the business with whom they entrusted their information. Settlement payments as well as the cost of legal defense against multiple litigants can overwhelm the limited resources of a small business.

Theft of Business Assets

Trade secrets and other intellectual property may be stolen and sold to other businesses or to information black markets. Access to financial account login credentials allows the cyber criminal to withdraw money.

Loss of Customer Confidence

A data breach affecting sensitive customer information will destroy trust in the company. This is especially true of small startup businesses that lack brand recognition and are working hard to gain trust. Most damaging is the loss of loyal repeat customers, whose patronage is essential to long-term business stability. Critical business partnerships may be lost if the partners' data is compromised. When word of a data breach gets out via social media and review sites, the affected company stands to lose a great deal of future business.

Whether a business survives a data breach depends on many factors such as its robustness and the severity of the breach. Unfortunately, small and medium-size companies lack the deep pockets of the large companies that have weathered major data breaches, such as Sony Pictures Entertainment. For the struggling startup and financially strapped small business, a data breach can be fatal. For more insights and answers to your security questions, contact us.