Starting Your Own Business - Reducing the Risks

In a recent poll, two out of three young people said they hope to start their own business one day. However, it takes more than a good idea and a desire to be your own boss to start a successful venture. Think of your business as a passion. Instead of chasing money, you are chasing a passion, because there are many ups and downs in business. Nothing comes easy. If the business comes to just being about money, you will give up easily when things get rocky.

Here’s the fact. About two in six new businesses fail by their second year. How can you minimize your risks?

If you have never worked in your life, you might consider taking a job before starting on your own. Work experience in the field you want to venture into may perhaps be the most productive use of your energy. Think of it as an investment for your future business. After you have gained the experience in one or two years, you can give your business a go. By then you will have learned the ins and outs of the real world and reduced the risk of your business. Part of the success of a business is attributed to knowledge in financial management. If you are still in school, take classes in management, business and entrepreneurship. If you have already graduated, take night classes.

Choose a business partner or two who complement your skills and fill in the gaps. Working alone can impair many new entrepreneurs. There is not enough time in one day for one person to do everything that is required to start up a business. Having a partner or two can really help with the burden in a startup.

Failing to write a good business plan is one of the biggest mistakes an entrepreneur can make. Put your business plan in writing because if you put it in your head, no one else can see it. A good business plan addresses all the risks and forecasts any problems associated with the business in the future. A well-written business plan is a good planning tool to raising the money needed to get started as well as showing that you are financially responsible although you may not have had time to build a long credit history. It will showcase your product or service, your plan to make a profit and the team who are going to bring the business to success. It should also include estimates for startup costs, projections for sales and profits, and long-term goals of the company.

In your business plan, it is safe to overestimate how much money you will need before the launch of the business than after in case you fail to meet projections. Limit the amount of personal funds you put into the business in order to minimize risk. Never use your credit cards because credit card debts can be very expensive. If your credit score is high, you may be granted a bank loan if you are seeking a loan for less than $50,000. Banks can be tough and even if they can’t give you a loan, ask how to improve your business plan so you can try again

The first six months into the business may be a difficult time because you likely will not have an income. Regularly compare your income and expenses to your forecasts. Use computer software such as QuickBooks to track your business expenses, check printing and payroll managing. It is important to stay focused on the business financial goal. In the first year you should focus on meeting or exceeding your projections and treating your customers good to ensure continued business.