There’s a widely held belief that most people who start businesses are born risk-takers—cowboys who would rather do things their own way, no matter what the cost, than hold down a job or listen to a boss. But while that may hold true for some entrepreneurs, the reality is you don’t have to be a roller-coaster risk-taker to succeed as a business owner. In fact, just the opposite: Smart entrepreneurs seek to minimize their risk from the get-go.
So how can you start a business, especially in today’s tenuous economy, without putting it all on the line?
Start by focusing on financial risk. The number-one reason small businesses fail is lack of adequate capital. Today, when so many sources of financing—from home equity loans to bank loans to venture capital—have either dried up entirely or become harder to get, this risk is more real than ever. It’s crucial to make sure you’re sufficiently capitalized.
Instead of relying on outside sources (which you may or may not be able to access), minimize risk by figuring out how much money you can put into your startup. Begin by assessing your personal finances, including checking, savings and retirement accounts. Do you have any assets you could sell to raise cash for your startup? How much money can you realistically put in to your new business?
The flip side of raising money is cutting costs. Create a startup budget (SCORE mentors can help) and scrutinize it closely. Where can you cut back? What can you do without or do less expensively? Can you barter or get friends and family to help you out for free? I’m not suggesting you “cheap out” and make your business less robust than it should be, but it’s easier than ever to start a shoestring business today and still have it look like a big-time operation—so don’t spend money you don’t need to.
If there’s still a gap between the money you have and the money you need, you have several options:
These are just a few options for starting up without risking your shirt. SCORE mentors can help you think through your financing needs and figure out how to get the money you need. Visit the SCORE website to get matched with a mentor and get free help 24/7.