Starting a business and managing risk go hand in hand. Entrepreneurship often means finding a solution that fulfills a need, and there’s no way to achieve that without trial and error. Even the mere act of building a business comes with certain guaranteed risks, from insufficient funding to competitive markets. However, most business owners believe this gamble is truly worth it, as simply making a few wise and calculated decisions can allow you to manage risk more efficiently. To that end, here are some of the most efficient ways you could reduce risks during your business’s early stages:
1. Scale your plans accordingly
When starting a business, many individuals have big dreams for the future. Unfortunately, these dreams rarely turn to reality, as there’s often not enough funding to support them. If you have big hopes as well, it would be quite beneficial to scale your initial business plan to match the reality and your current funds. Whether that means lowering the number of locations you wish to establish or offering smaller ranges of products and services that could increase over time, scaling your business plans doesn’t necessarily entail giving up on your dreams, but rather adjusting them to match your current reality.
2. Consider financing your growth
All companies need to have enough capital in order to launch, build, and support a business. In most cases, startups will require outside funding from a third party such as a bank or an investor to achieve this. But if you have enough funds of your own, it might also be a good idea to finance your business by yourself. This will prevent you from mortgaging important properties or handing over a percentage of your company, while also alleviating some of the common anxieties that come with significant debt. However, it’s important to keep in mind that financing a business is quite a challenging endeavor that requires plenty of discipline, control, and wise decisions, which is why it might not be the right choice for everyone.
3. Carefully think about insurance
Insurance is an important aspect all businesses should consider, as it allows you to protect your assets and reduce common early-stage business risks. However, keep in mind that not all insurance policies are created equal. In places like Australia, even the largest insurance providers have been selling junk insurance products to their customers, mostly attached to credit cards and loans. Instead of offering real value, these products were entirely worthless and unnecessary, leading many Australians to seek claims. If you want to avoid such a scenario and make an effort to truly protect your business, be very careful when selecting the right insurance products for your specific needs and requirements.
4. Look for the right banker
Similar to the insurance policy, selecting the right bank and banker will also be crucial for most small businesses and startups. At the beginning of your journey, you will likely need certain loans, effective financial plans, as well as valuable advice regarding your finances. The best professionals will keep these aspects in mind, and do everything in their power to help you grow and prosper, as a bank grows along with a successful business. So, make sure to select a good banker you could truly trust, and one that will efficiently contribute to your decision-making process, allowing you to reduce risks and achieve success.
5. Maintain a stream of income
Unless you manage to deliver real value for cash quite quickly, you might need some form of insurance until your business truly succeeds. For that reason, many entrepreneurs decide not to quit their day job when starting a business, at least at the very beginning. This choice allows business owners to maintain some form of security and minimize the risk that follows startups, while maintaining a steady stream of income they could further invest in their business as well. If you choose this option, allocating your resources only to the tasks you could realistically perform and hiring a contingent workforce to take care of the rest can be a great affordable compromise.
6. Consult trusted professionals
Among the best ways to reduce risk in any aspect is to have trusted professionals by your side. Apart from teaming up with a good banker, lawyer, and accountant, it might also be a good idea to consult other business owners. Whether you find a mentor or even join a specific advisory group, turning to experienced individuals can be of great help for your business. As they’ve likely been down the same road before, such professionals will be able to offer valuable advice and insights into the industry, helping you to evaluate your options, make more informed decisions, reduce your risks to a certain extent, and avoid making the same mistakes.
Regardless of the type or the size of the business, every startup comes with a certain amount of risk. However, business owners can still ensure success simply by evaluating and managing a few key aspects of early-stage risk.