How do I deal with the risks associated with starting a business?
Starting and operating a business involved many risks, but also many rewards. Follow these tips to reduce the risks and ensure your business is on sound footing.
Things to do:
- Start a business you enjoy.
- Overestimate your operating costs. It will be difficult to get another loan or a larger line of credit later because investors might assume you didn’t do your homework thoroughly the first time.
- Know your market and your competition.
- Owners should pay themselves a salary they can afford. It may not be as high as desired but it should be adequate.
- Never take the public for granted. Make service, integrity and honesty high priorities.
- Establish and maintain an ongoing relationship with your banker. Always be on the lookout for sources of capital for future growth.
- Assess the company’s credit policy carefully. Realize that some customers won’t pay on time and some won’t pay at all.
- Get professional help in preparing the business plan and cash flow chart.
- Owners should hire people who have different skills, abilities and characteristics from themselves.
- Define each employee’s job and make sure everyone understands his or her obligations. Be willing to delegate.
- Spend time researching and choosing a location.
- Join clubs and associations for new businesses and muster support for your new enterprise.
- Define your business goals and establish a time-management system.
- Solicit the help of family, friends and colleagues.
- Keep up with industry news by taking courses and by reading industry magazines and related publications.
Things not to do:
- Base the decision to become an entrepreneur solely on the ability of a venture to make money.
- Pretend there are more start-up funds than you really have.
- Assume that because your product or service costs less than your competition, people will flock to your door.
- Pay yourself a salary that exceeds the salary received while working for someone else.
- Expect customer loyalty before it is earned.
- Communicate with the bank only after running out of money and managing cash flow on an ad hoc basis.
- Spend working capital down to the last dollar, expecting that people will pay you in time to cover your expenses.
- Hire people who share your background and entrepreneurial ambitions. Hire a friend’s friend or hire solely on the recommendation of another person.
- Give employees no decision-making authority. But, if anything goes wrong blame them!
- Rent expensive office space to impress your clients.
- Assume that success was achieved independently and the support of friends and colleagues is no longer needed.
- Assume that no one will know or that it does not make a difference if laws are obeyed.
- Try to do everything yourself (no matter how much energy you have or how clever you may be).
