"The biggest risk is not taking any risk... In a world that's changing really quickly, the only strategy that is guaranteed to fail is not taking risks."--Mark Zuckerberg, Founder of Facebook
Everything has a level of risk, from learning to ride a bicycle to trying a new hairstyle. When you own a small business, you know you're accepting risks--some you're aware of, and some will be surprises. As a smart entrepreneur, you don't let this stop you from weighing the facts and making the best possible choices. And if things don't go as planned? Well, you develop a new strategy from a wiser perspective.
With limited resources and narrow profit margins, learning how to manage risk should be a top priority. Here are four considerations:
- Track your cash flow: How much money do you have right now? Can you pay your bills? What if your biggest client went elsewhere? Ideally, you have three to six months of funds tucked away to cover expenses. Be conservative. Ask your vendors for sixty or ninety days to pay. You should always know your financial status, good or bad, and have a realistic contingency plan.
- Listen to alerts: If you've hired well, or have close advisors, you can trust their doubts. Are they seeing something concerning in a contract, employee, vendor, or opportunity? It's easy to dismiss others' opinions, but you need to listen. They have your best interest at heart, even if you don't want to hear it. Thank them and reward them.
- Get legal: Truth is, you can't grow and succeed without legal advise. Hire an accountant. Form a LLC to limit any liabilities, rather than have your personal finances be at stake. Have an attorney review your contracts. Yes, it costs money, but you can't afford not to protect yourself. Chances are that at some point, you will be glad you had the foresight to hire professionals.
- Avoid commitment: It may feel secure to sign a long-term office lease. Until you are firmly established, you need to be nimble and able to make quick adjustments. Clients change and projects go sideways. You may decide to narrow your focus...or expand it. Something like an expensive address can become a detriment. Whatever it is, be cautious about committing to anything that could be a drain on your finances.
Risk is necessary--in fact, it can be exhilarating to take you to the next level. But always, even when you become a Fortune 500 Company, it needs to be carefully considered. Remember: Mark Zuckerberg wouldn't have succeeded without risk. Here's hoping you use risk to become the next phenomenal business!
Please share this article on social media if you found it helpful. If you have a comment or question, please post and add your voice to the conversation.