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Risk. It’s a word that means different things to different people. Some people are fairly risk averse and like to minimize it at all costs. For them, a steady paycheck and conservative investments help them sleep at night. For other people, the thought of risk gets their adrenaline pumping and they like to push the limits. Think skydiving and casinos. For many, risk is simply something to be accepted and managed. They realize that risk and return go together and they can also make ideal entrepreneurs.
So, if you find yourself willing to take a bit of a risk on your business acumen and talents, here are a few options to mitigate the risk of business ownership:
- Consider buying a franchise: Franchises come with a playbook, policies, procedures, a recognized brand, and pre-made marketing strategies. These are all things that an independent business owner should (but often don’t) create on their own. When you follow the franchisor’s prescribed formulas, you can often reduce risk because they have worked for other franchisees in other markets.
- Hire a great team: Nobody is good at everything, but everyone is good for something. Recognize your strengths and hire your weaknesses. By developing a strong, well-rounded management team, you reduce the risk of missing a great opportunity or navigating the inevitable challenges of business ownership.
- Retain the right advisors: Find the very best accountant, attorney, and financial planner you can afford and be super transparent with them. You also need a rock-solid relationship with a local bank who will have your back when the going gets rough (PPP loan in record time, anyone?). These professionals are worth their weight in gold and will help set you up for success while you’re running your business and when it’s time to plan your exit.
- Key person insurance: If something were to happen to you, would your business be harmed financially? If so, you need key person insurance. This allows your business to fill the gaps financially while they hire and train your replacement.
These are just a few ways to reduce the risk of business ownership. We also recommend always knowing what your business is worth so you can manage the economic risk of selling and outliving your money in retirement. For a more in-depth conversation about this and other strategies, contact us for a free consultation.