Unfortunately, running your own business comes with some measure of risk baked right in. But here’s the good news: smart entrepreneurs will get out ahead of it and manage their risk right off the bat, insulating themselves from trouble. Here are the top five risk management tips for entrepreneurs and new business owners:
#1: BE REALISTIC ABOUT THE RISKS
Do your research to discover what kinds of risk are out there, especially for your type and size of business. That might include financial risk, legal risk, and more. When you know what’s possible, you know what to expect. That means you can prepare for it ahead of time. When you’re realistic about what could happen, you’ll be prepared in case it does.
#2: Protect against financial risk
Financial risk is probably the most common type of risk that new business owners face. So approach it head-on. Reduce your risk from the outset by setting up proper financial records, minimizing any outstanding debts like credit card debt, and keeping any outside loans and other financing arrangements to a minimum. If you have a viable product or service and a hot market, these things shouldn’t present any problem.
#3: Get the right insurance
Insurance, of course, is the tried-and-true method for managing risk of all kinds. Get tailored risk-management insurance for your business; there are all kinds of packages and coverage out there, and you might want to talk to an accountant, financial professional, or insurance agent to discover what might work best for your needs.
#4: Save for a rainy day
It’s always advisable to have savings on hand so that you can tap into it if you need it. Make a separate business savings account and funnel money into it regularly. You’ll be glad you have it when the time comes.
#5: Weigh risk vs. reward
Remember that some risks are actually worth it. Starting a new venture that has a chance of losing money, for example—if it goes well and doesn’t lose money, then there’s only upside. If the risk is relatively low, it may very well be worth considering. Don’t take the approach that any risk is a bad thing. Remember: some risk is built into your business, so weigh it against the reward.
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