Most people think that entrepreneurs are ultimate risk takers. This view is partially wrong, since entrepreneurs strive to do everything in their power to stay away from business risk, as far as possible. Although starting a business requires some courage, it also requires above-average risk-management skills. In this article I’ve come up with several tips that will help you to reduce business risk to the minimum in first phases of company’s development.
Tailored insurance policy
Most entrepreneurs decide to purchase standardized insurance policies that are more tailored for saving insurance company’s money, than for protecting their company from potential risk. That’s why specialized insurance policies rule, and although they cost significantly more they provide you with real protection. Creating specialized insurance policy requires you to know all potential risks yours and other companies in the industry are facing, which means that before you speak to insurance salesman you need to conduct a wide research that will determine all potential risks you should cover your business from.
One of the best examples of specialized insurance policies, are the ones taken by most web-based businesses today. These insurances cover losses caused by problems with hosting and data breaches, and therefore provide perfect protection for entrepreneurs who conduct their business online.
Buy surety bonds
Although most entrepreneurs view surety as an unwanted necessity, these bonds other than protecting obligees interest, also guard contractor’s reputation and protect them from possible capital claims and lawsuits that might occur when project doesn’t go in accordance to plan and contract. Unlike other types of guarantees obligees usually ask for, regular surety bonds don’t freeze contractor’s assets, which means that they can invest almost all of their funds in the project in order to get it done.
Know your business partners
Doing business with an unknown companies and individuals hides many potential risks. Entrepreneurs should always check their business partners before signing the contract and there are few types of checks they can use:
- Simple Google check– this check should be done for potential partners and it is the simplest and least expensive one of all. Simply type the name of an individual or a company in Google Search, together with words like: ‘scam’ or ‘fraud’ and check whether this person or an organization tried to scam someone in the past;
- Credit check– there are three credit bureaus and lots of agencies that provide credit information about both companies and individuals. Always conduct a credit check for the company before, signing a deal. For doing the check you will need a written permission from company’s representatives, and if they don’t want to give you that, they definitely have something to hide;
- Criminal check– this is one of the most basic checks you can do when dealing with potential business partners you see for the first time. There are several websites that can be used for conducting a criminal check, including: CriminalSeraches, SearchSystems, VirtualGumshoe, etc. These websites list public court records and enable you to navigate your search by name, city, address and many other criteria;
Diversify your business
In the same way as investors diversify their portfolio, and invest their money in stocks from different industries, you should try to make your business diversified and interesting for many different customer groups. This is very difficult in first few phases of company’s development and it requires strong set of entrepreneurship and marketing skills. Rule of the thumb is that your business should never rely on only one product or service and you should always try to make your offer wider and more complex.
Entrepreneurship can sometimes be a very risky business, but even then it is much more interesting and fulfilling than corporate 9 to 5 work. After some time, your ability to manage different risks that threaten your company will improve, and your work will become much less stressful. This is when you will realize incredible benefits entrepreneurship brings.