This article was written for the American Executive Centers and has been published on its blog.
Winning at starting your own business involves an accurate understanding of the risks involved and how to manage them or transfer them. Entrepreneurs understand that risk is an integral part of creating something innovative and of value. They know that in order to win, you have to bet. Successful entrepreneurs place smart bets, assess the risks and manage them wisely.
Recognize the risks you may encounter as an entrepreneur:
- Keep abreast of economic conditions. Are they improving or worsening? How will these changes affect your business?
- Plan for effective management. Employ someone to help build your team. You will be busy with numerous projects. Consider an HR specialist for vetting the right people.
- Consider your marketing and sales capabilities. You’ll be busy selling, as the primary salesperson.
- Review technologies and software needed and the costs for scalability. What are the competitive threats? What will give you an edge?
- Retain an attorney for contracts and legal documents. Don’t wing it. Yes, it costs to hire an attorney, but the costs can be much greater without one.
- Hire personnel with integrity. Entrepreneurship requires a high level of trust in a small group of employees.
- Employ a lean staff to reduce operating expenses. Consider a concierge service. American Executive Centers provides office and conference space, administrative, paralegal, bookkeeping, and IT support, and creative services.
- Consider the potential ramifications of your product or service on customers and the market. How much will legal fees and insurance coverage cost to minimize your liability?
Place smart bets and manage risk prudently:
- Look for opportunities that allow for minimal loss, but 10 times that amount in gain if won. Never bet more than you can afford to lose.
- Offer innovative functionality. Is the product or service you are about to create something that, when people find out about it, they will wonder how they lived without it?
- Develop a comprehensive business plan to address all potential risks. This plan includes financial support, sales forecast, cash flow from operations, compliance, etc.
- Always prepare Plan B, C, and D in case your Plan A doesn’t work out as expected. It probably won’t.
- Cultivate and maintain alliances. This is no time to be the “Lone Ranger.”
Other considerations before you take the plunge:
- For a new business, life begins with a sales forecast.
- Cash is the ultimate buffer. Have lots of it.
- If you lack enough cash to self-finance, it could be a blessing. You’ll have to convince others to invest in your idea.
- Will your immersion in this venture jeopardize your family and other concerns?
- Most new businesses fail within five years. Why won’t yours?
- Don’t be too proud to ask for help. Use an attorney, CPA, financial planner, bookkeeper, et al.
The rewards of entrepreneurship can outweigh the risks, but be prepared to recognize the risks in order to manage them. Although you may not completely control the risks, you can influence the results with hard work, flexibility, and staying power.