We all know that there is no hope of reward without taking some risks. The trick is to balance your level of risk with the chances for reward as well as the cost of any potential downfalls. When you own a business, you take risks all the time.
However, calculated risks are not the same thing as reckless abandon. As you assess your risks in your business, here are three questions to ask yourself.
Do You Have Unique Industry Risks?
While all businesses come with several risks common to all industries, many industries also carry their own unique risks. It is important to understand and mitigate these risks before moving forward.
For example, risks associated with construction include personal injury and damage to property. Risks associated with the medical field, on the other hand, are more likely to include lawsuits. Other common risks to many industries include theft, fire, natural disasters, and loss of inventory.
Do You Have Enough Insurance?
Insurance is a vital part of your business safety net. There are many options for insurance coverage for your business. These include but aren’t limited to: workers comp insurance, errors and omissions insurance, business liability insurance, business interruption insurance, and commercial property insurance.
As important as these plans are, they don’t always offer enough coverage. You might want to consider adding an additional layer of protection by purchasing good umbrella insurance. Umbrella insurance covers what basic liability coverage doesn’t.
Do I Have Enough Money Saved?
Rainy days can come to anyone. The question is are you prepared? While putting your profits back into your company for future growth is necessary, you should never spend everything you earn. Learn to hold a little back for that proverbial rainy day. Experts recommend building enough money into your business savings account to cover 6-8 months of operating costs. Doing so provides the cushion you may need if sales are low or tragedy happens. The good news is your business savings account is a risk-free place to store up funds. It is also great insurance against overdraws on your checking account.
Anything worth doing comes with some inherent risk. That’s what life is all about–learning to take positive risks and growing in the process. However, reckless abandon has no part in a successful business. While some risks are necessary, it is vital to mitigate those risks and cover your bases as much as possible.
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