Everything you do in life has risks. However, some activities are riskier than others. For example, starting a business comes with extreme risk – especially as only half of all businesses survive their first five years.
But this doesn’t mean that your business is doomed to failure is the are several things you can do to reduce risk when starting a new business. These tips are meant to give you a heads up on what to look out for when starting out and hopefully you can use one, or all of these, to increase your chances of success.
1. Have a Plan
While having a plan won’t guarantee your success, the absence of one will leave you vulnerable in the long-term. This doesn’t mean that you need to have a 200-page business plan for your business. But outlining some of the key steps that you need to take including how you will use your business plan will make it easier to achieve your goals.
As part of developing a solid business plan, you will need to detail how much money you will need to launch your business and how long it will take to reach breakeven. The latter is important as it will get you to start thinking about the actions you will need to take to get your business to a point where it is self-sufficient.
Having a plan is so important that you should have it for every investment you consider. If not, then you’re leaving your chances of success to nothing more than luck. Once again, having a plan won’t guarantee success, but not having one just about guarantees failure.
For example, if your business involved real estate and you don’t know where to start, then part of your plan might be to work with a real estate brokerage to help you identify the best opportunities on the market.
2. Just the Facts
There’s a saying in productivity improvement circles – in God we trust, all others bring data. This is something that you should extend to how you run your business. While there is always an element of gut or feeling when making decisions, your instinct should only come into play after you’ve reviewed the facts.
Failing to do so risks jumping in with both feet and this could leave you with no options if things go wrong. As such, you want to design a way to capture and interpret the key data about your business.
Doing so will help you to fact-based decisions about the direction of your business and in some cases will allow you an opportunity to get closer to your customers or gain an advantage in your competition.
3. Take Care of Your Customers
Another way to reduce risk when starting a business is to take care of your customers. This might seem like a no-brainer, but you would be surprised how many entrepreneurs forget how important their customers are to the success of their business.
Given everything entrepreneurs must juggle when they are starting a business this is understandable but at the same time, your customers are the ones who will keep your business going.
As such, you want to make sure that you maintain a positive attitude when it comes to dealing with your customers. If your customers are happy, then they are more likely to be loyal to your business and this will help you to grow.
4. Don’t Fall into the Debt Trap
When you’re starting, you might think that the only way to succeed is to get a loan. While there are times when credit can help you to grow your business, it can also be a double-edged sword.
As such, you want to have a plan for every loan you take out or risk falling into a debt trap. This should include how you will use the money and how you will repay the loan. Keep in mind the latter is just as important as the former as taking on debt without a clear idea on how you will repay it will end up costing you in the long run.
5. Be Insured
This should go without saying as insurance is there to help you reduce your exposure to risk. While you might not be able to afford insurance when first starting out, you will want to find an insurance agent who can help identify the right type of coverage you need as your business grows.
The lesson? Don’t leave it to risk, have a plan, rely on facts to make decisions, take care of your customers, be warry of debt, and be insured when starting a new business.
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