Minimizing Risk
Mark Twain noted, “There are two times in a man's life when he should not speculate: when he can't afford it, and when he can.”
Certainly, there are many risks involved in starting and running your own business, no matter what type of business it is. But you can minimize these risks by understanding what you're getting into and knowing how to get out of it if you must. Never enter a room without an exit. Chapter 19 will help you to discover those exits as well as help you to keep from using them.
How can I minimize risk?
Start slow and learn from every error. A $100 mistake can net you a $1,000 education if you carefully analyze and learn from it. What went wrong? What should have happened? What will you do next time? Also, analyze and learn from other people's mistakes. It's cheaper!
Investing Time and Money
A major risk to starting your consulting service is that you will lose your investment of time and money. How can you minimize these risks? Some consultants start their service at home in their spare time while working another job. This structure presents a number of challenges, but they can be overcome. The business can depend on an answering service or a relative to handle phone inquiries. In fact, depending on the needs of clients, a consulting service can turn this limitation to an advantage by offering evening and weekend appointments that competitors do not.
Selecting a Location
The most successful consulting services are those that operate from a professional office near their clients. As a new consultant, you may be tempted to locate in a lower-rent area to reduce financial risk. Don't! You'll actually be increasing your financial risk because a poor location will yield a higher percentage of income going to rent. For example, a high-rent office may cost $1,500 a month but bring you $15,000 a month in business, costing 10 percent of income, whereas an $800-a-month office may only bring you $4,000 in business each month, costing 20 percent of income. The cheaper route can actually increase your risk.
The best way to minimize risks is to understand what they are and prepare for those from which you cannot recover. You'll want business insurance. You'll want sufficient operating capital to get you through the first six to twelve months of your business. You'll want only minimal office supplies. You'll want to come up with alternative services to ensure you have income. You'll want to make sure that any leases you sign can be renegotiated if your business doesn't work out. As suggested earlier, make sure you have sufficient exits before you enter.
An alternative to high rent is shared rent. That is, you may be able to sublease a desk or office from another business. This can be especially effective if the landlord offers a related but noncompeting service with which you can share clients.
