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THE RISKS OF STARTING A BUSINESS

People starting out with a new business are usually full of excitement and confidence that they will do well, and expect few teething troubles in getting started.

The success of a business venture depends of the quality of preparation and market research done before setting out. For the ill prepared there is a real risk of early failure or at best a long hard struggle to achieve the smallest of tangible results.

Just in case you do not make it in the world of the self employed small business let us dwell on the realities of failure so we can perhaps plan for a back door to minimise the risk should things fail or take longer to be successful;

Loosing money

Ideally your investment should be minimal, if at all possible start trading from home whilst holding down a regular well paid job will reduce start up costs to the bare minimum.

Use available savings and fund the business from cash flow from actual earnings, and reinvest business profits back into development and expansion.

Decide what you can afford to LOOSE if all fails, a few hundred is potentially fine, although maybe not enough to establish a business. Thousands may be more of a problem. Remember to have MORE available funds to call on as often your budget may increase and jeopardise the business if you are under funded.

Available money is not a license to blow it all as quickly as possible, but an INVESTMENT that needs to be spent wisely only when needed, and then sourced at best prices (based on quality and reliability)

Getting into Debt

If you borrow money to start a business and overspend, then the business fails to take off as expected or planned you can find yourself quickly in debt and unable to fund the venture. Soon you are out of business.

Left with a failed business often means you as owner are left personally to pick up the tab, which may mean working extra hours, to forgo vacations or to sell your home to clear debts especially if you have remortgaged or taken out secured loans on your house.

By limiting any borrowing to the minimum and ensure you can fund from ACTUAL income rather than hoped for profits will reduce long term risk.

The time to borrow is usually to EXPAND a proven successful business concept, ideally which is generating profits (the money left after paying costs AND your time). Borrow what you can AFFORD to service from those actual profits, not hoped (dreamed) for profits.

Loss of prestige

Nobody likes a looser, so if you fail at business you may find yourself embarrassed with friends and relatives. All the more reason to plan the venture well and enter into it with "eyes open" rather than shut or blinkered.

Avoid "bluffing it" and tell everyone you are doing "great" when you are struggling. Face realities and be prepared to rethink your plans or pack it all in BEFORE things get too bad.

Useful web links

• Reduce the Risks for Your Small Business Today, small businesses face bigger risks than ever. But the more you know about risk, the more you can control it. So take charge of your financial.

• Small business the risks in starting a small business Small Business Risks. Do You Really Want to Start a Small Business? All to often I read messages from people who want to start their own business because.

• BizStats - sole proprietor statistics, industry statistics Free Sole Proprietorship Business Statistics. Select a report series to find Sole ... Find Industry Net Profit Risk · Find Industry Sales tables

• How To Manage Risk in Your Business Planning for the risks that will occur when you start your business is critical to your success. Here are the basic steps you need to follow.

• Risks That Small Businesses Face Some of the risks that small businesses face are overhead cost, cost of equipment, expected sales volume, salary cost, taxes, price charged for services.

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