Can You Really Handle The Risk? (And How to Minimize It)

by Kori Rodley Irons | More from this Blogger

21 Sep 2007 12:15 PM

I just want to state the obvious right up front--starting a small business is risky. Even a tiny, little, home-based business can be risky to one's finances, personal life, and career. That said, many of us still want to do it more than just about anything. It can be helpful to evaluate whether or not we can really handle the risk associated with starting a home business and look at ways to minimize that risk, if possible.

Starting a home based business can be risky in several ways--financially, it can mean letting go of a steady income and putting all your eggs into the small business basket. There can be expenses, the need to raise capital (funds) for the business, and as the owner you are assuming all that financial risk. It can also put a strain on your health, family, social life etc. Most small business owners work far more than the steady, typical 40 hours a week and business can slop over into evenings, weekends, etc. If you have additional employees, you will be taking on the risk of that. You can see how a small business owner has to have a high capacity for risk!

You can minimize that risk by starting out slowly, perhaps even keeping a part-time "traditional" job to help ease cash flow and financial stress. You can also make sure you've got sufficient savings and liquid assets to help cushion the realities of a business start-up. Good planning, paying attention to legal issues, good market research, and a strong support system can help to make a new small, home business endeavor a bit less risky. It is a good idea to try to thoroughly examine your "risk quotient" while you are in the planning and exploration stages of your business. You may still decide to take the leap and plow on with your business idea, but at least you will be doing so with your eyes wide open!

Also: How do You Know If You've Got a Good Idea?

Ask Yourself, How Secure is Your Business?

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