Starting a Business Series: Financial Risk

Starting a business can be exciting and fun but it can also be very intimidating and scary. Mostly, this comes down to the financial risk involved. When you start a new business you are usually starting from ground zero financially. You may not see income for weeks or months to come. This can lead to you wanting to lean in on a new business ever so slightly with your time at first due to a fear of not making enough money initially. That, in turn, may cost you success in the new business. One cannot serve two masters so it’s tough to truly, fully commit to two ventures at once. You could be purposeful in this time of transition and take the risk out entirely as well in more than one way.

You could decide you are going to stop doing what you are doing now to make money and commit fully to the new business. In this situation you could choose to save enough cash so you can live without fear of paying your minimum mandatory expenses for a certain period of time. Depending on the potential cash flow of the new business this could be 6 months or more. Let’s face it, if you can’t pay at least your minimum mandatory expenses after six months this new business may be not a good fit for you for a certain number of reasons.

Alternatively, you could decide that the new business will be your second full time job. This means you keep your current position and you then work longer hours and put the energy into starting the new business outside your normal working hours. This can be limiting if the schedules do not correlate well. For example, if you work a traditional job now and the new business would require most activities to be that time frame as well it may not work out at the end. So you should consider the likelihood of success given the two interacting together.

Overall, you should also be honest with yourself on where you are going and how quickly you want to reach your goals. If you know that to be successful in a new business you need to be fully committed you may not be able to continue your current position and expect good results. You may also want to consider your obligations in life (kids, medical costs, etc.) and be realistic on how much risk you are willing to take on financially. Only you can decide the best path to ensure your business success while taking the risk out of it as much as possible.

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