7 Ways to Reduce Entrepreneurial Risk

When I first quit my job and launched a company, I was 23.  I thought I was invincible.

When I sold my first company, I was 28.  I thought I was unstoppable. In fact, I actually believed that entrepreneurs take risks to earn their rewards.

Now I’m 40-something and on my fourth business venture. And now I know better.

Nothing is unstoppable. No one is invincible. For me, entrepreneurship is no longer about taking risks. It's about understanding and managing them.

More than any other person, an entrepreneur must acknowledge and minimize the risk in his or her life.  How?  Here are seven absolutely mandatory methods that I think every entrepreneur should use to manage risk:

1. Diversify your income.  I have multiple streams of income. Like writing this blog. And rental property. It ain’t much, but in case my business goes south, I have lots of other revenue sources that I can count on.  It’s an essential diversification strategy.

   
   

2. Save more money.  There have been years when I’ve lived on less than a preacher’s salary.  Much less.  When you build a business, there is nothing more comforting than having a savings account to pay the rent.  When times are tough, I use it. When times are good, I replenish it.

   
   

3. Take the home-court advantage.  Whenever possible, I stick close to my family.  Through thick and thin, nothing sustains you like kin.

   
   

4. Plan obsessively.  I never start a business without a business plan. Scoff if you want, but an ounce of market research is worth a pound of bankruptcy advice.

   
   

5. Forecast obsessively.  Surprises are for birthdays.  If I’m going to run out of cash, I want to see it coming from a mile away.  Forecasts give you time to zig when the markets decide to zag.

   
   

6. Work harder and smarter.  A 9-to-5 lifestyle is not part of the deal when you're an entrepreneur. I maintain my work-life balance by taking a few months off after I sell a company – not while I’m building it.

   
   

7. Insure yourself against everything.  I have insurance out the wazoo.  I’m insured against fire, disease, death, dismemberment, and disaster.  My home, car, and property are all insured.  I even have an insurance policy for my insurance policy: It's called an “umbrella policy,” and it adds another million bucks to my coverage in case the worst strikes.

Building a business is hard enough. Don’t make it harder on yourself by taking unnecessary risks.  Open your eyes to the risks in your life, then neutralize them any way you can.  Have you thought of some other ways to do this? Leave me a comment below!

Dedicated to your (risk free) profits,

David Worrell