How to Minimize the Risks When Starting a New Business
Entrepreneurship is definitely more risky than most 9 to 5 corporate jobs. From the moment they incorporate their new company, entrepreneurs need to balance various types of business risks that come their way. In this article I’ve compiled some of the tips that will help new business owners to reduce amount of risk at the beginning of their entrepreneurship career.
Buy specialized insurance policies
Entrepreneurs today mainly purchase standard insurance policies. The truth is, these policies are more customized for guarding insurance company’s interest than for protecting businesses from potential risks. That’s why smart entrepreneurs usually purchase standardized insurance policies. These can be easily agreed with insurance companies and can cover wide range of possible risks, entrepreneurs would like to protect their newly incorporated companies from.
Since entrepreneurs play major role in creating these policies they need to do an elaborate research before contacting insurance salesmen and determine risks that are threatening theirs and other businesses in the industry. Great example of specialized insurance policy use is when online businesses purchase policies that protect them from hosting company’s liquidation and from damages caused by cyber-attacks.
If you’re not familiar with them, regular surety bonds represent a guarantee to the obligee that a contractor will finish a certain project in a timely manner and in accordance to the contract. There are also license surety bonds, that are required for conducting business in certain industries and in their case the public is viewed as an obligee. Although surety is not so popular term among entrepreneurs, these bonds actually protect contractor companies from obligee’s capital claims, which can easily lead them to bankruptcy. License bonds on the other hand protect service company’s reputation and make them more legit.
Check your business partners
There are several good ways you can check your business partners. These are some of the most useful and efficient ones:
Google check– Use world’s biggest search engine to check your potential’s partners. You can do it by typing individual’s or company’s name and adding words like ‘scam’ or ‘fraud’ to it. This way you will find out whether there are people that got scammed by this person or company before, decided to share their experiences online.
Social media check– Social media behaviors tells us a lot about both companies and individuals. If company is sharing offers that are too good to be true on their company’s Facebook page, you definitely need to conduct some further checks on them. Same goes for individuals, check all available photos, comments, friends, etc.
Criminal check– Court records in United States are public, which means that you can easily conduct criminal background check on both companies and individuals. There are plenty of websites that offer this service.
Credit check– there are three credit bureaus in United States (Equifax, Experian and TransUnion) and they all offer paid credit checks on companies and individuals. You can also obtain this service at various agencies. To conduct this check, you would need a written permission. If your potential business partner doesn’t give you this permission, it is probably because he/she has something to hide.
Diversification is a magic term when it comes to stock portfolios, and it can also help new entrepreneurs to reduce business risk. It is hard to diversify business in the first phases of its development, but this should be one of the main goals of every entrepreneur. They should at least try to widen up their audience and add new services. Relying on one service or product can be disastrous and it can easily lead company to bankruptcy.
Everybody tries to reduce business risks, but sometimes taking certain amount of risk is inevitable in order to secure higher profits that will enable your company to grow. Smart entrepreneurs have a perfect mix of courage and caution, and they always think twice before making a decision.