There is always a risk when you start a new business
, but there are also many rewards if you take the chance to be a business owner and control your own destiny. Many people avoid starting their own businesses because of the risk. But you can minimize your risks by being prepared and knowing where the landmines are. You don't have to be overly cautious, just know that a certain amount of risk is to be expected with a new venture.
Look into the future and try to predict what could possibly happen. Cover as much as possible to avoid problems in the future. There are a few things to consider before you open your doors for business.
Get everything in writing. You need to have everything in writing, even with your family. Having a formal contract will help everyone sleep at night. Putting a contract into writing is a good way to clarify who does what. It will help avoid misunderstandings later on. If you stand to lose a large amount of money in the future, then a contract is necessary.
Make sure you are properly insured. Anticipate what could go wrong and prepare accordingly. If you sell a product you will need general liability and product liability. Disability insurance will cover part of your income should you lose the ability to work.
You want to make sure your business is set up properly from the beginning. Get the advice of a qualified attorney and accountant and do it right to start with. Use separate entities to protect your assets.
The number one risk for small business owners is their cash flow management. Underestimating how much money you will need for your business is easy to do. It seems like it will always keep coming in when times are good, but you need to prepare for downturns in the economy, the loss of a key customer, changes in technology or your industry or any other event that could cause your cash flow to dry up. Figure out how much money you have now and how much you would need to have coming in if anything changed. Have a backup plan and make sure to keep at least three to six months of money in the bank just in case you need it.
You will never be able to avoid all risk, but being prepared will help.