How to Take Business Risks
- 1). Prepare a list of possible risks that could exist in your business. Use the following categories to create your list: financial, product, marketing, people and competition. Analyze the scenarios of what could happen. Use a business mentor to help analyze your risks and work on solutions for managing them.
- 2). Calculate your financial risk by studying your cash flow. Evaluate each month how much money you have by totaling your accounts payable and accounts receivable. Set up a fund to cover three to six months of expenses in case your sales drop or unexpected expenses occur. Create a list of expenses that could be cut or lowered in the event of reduced income. Know the amount of sales that need to be generated to keep your business profitable.
- 3). Acquire insurance to cover risks. Include liability insurance and damage coverage for things like product failure, injury or contract problems. Update the type of insurance that you have as your business expands. Check and keep on file a copy of your subcontractor's liability insurance.
- 4). Know what your loss could be. Prepare yourself for the worst scenario. Create a plan to end the loss. If the risk you are taking doesn't work, have a backup plan to pull your business out of trouble.
- 5). Create separate entities for different parts of your business. A builder may choose to have a remodeling division, another for commercial development and a residential entity. When one entity fails, the others may remain successful, and this can help prevent the loss of your assets.
- 6). Analyze your competition. Find out how much competition there is for your product or service. Check if there is a market for your product and how large that market is. Do research to determine if your market is a growing industry.
- 7). Review the regulations that are required for your product. Check if any new regulations or laws are being passed that would affect your business.
- 8). Keep detailed records on your business. Analyze your sales data and product research development. Check the effects of your marketing plan. Make changes to your business plan if your sales or marketing efforts are not creating the results you want.
- 9). Hire the best people. Write a detailed job description and qualification list for your employees. Terminate employees who are not performing up to your standards.
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