Starting a business or venturing into self-employment can at times involve substantial risk. Not only is there a risk that leaving a current job or career to try your hand at working for yourself could leave you without a stable income and having difficulty re-entering that field should your venture be unsuccessful, but it could pose serious financial risks as well.
However, not every startup has to be a risky venture. There are certain safeguards to look for in business opportunities that may act to protect you and your assets – or at least help limit risk – when looking to try your hand at working for yourself.
Low startup and overhead costs
With the internet as a tool, it may never have been easier to look for and find business opportunities with low overhead or startup costs. Rather than having to rent or lease a location, pay for utilities, buy shelving or display cases, purchase a cash register, and all the rest that’s involved in setting up a business location, the internet may provide for an almost zero-overhead business opportunity and from the confines of your own home.
Being able to explore low startup and overhead cost business options this way may not only allow you to get into the business quickly and affordable, but hopefully get out in the same way should the situation call for it.
Another way to safeguard a new business venture is to consider the type of inventory that might be involved. Buying expensive, quickly perishable, or slow turnaround type inventory could leave you not only having to put a lot of money into the startup costs of a new business but be cashflow starved should sales not take off right away or make recouping costs difficult should the business venture fail.
Therefore, it can be extremely important to consider just how expensive inventory will be, what the margins will be between cost and sale price on such inventory, how it will depreciate – or potentially appreciate – over time, how easy it is to move or consume the inventory should it not be sold, how bulky inventory is, and how easy it would be to store these items for future use or resale in the future.
Good cashflow can be critical to a new business. And having too much cash tied up in startup costs could leave you out of luck when it comes to buying more inventory, making adjustments or improvements to your operation, marketing and advertising your products or services, or taking advantage of other opportunities if or when they present themselves.
By doing things like tracking sales, inventory, and overall expenses, as well as having a good budget and forecast in place, you may be able to determine just how quickly your cash leaves and comes back to you, allowing you to better determine how much you need to keep on hand for normal operations and reserves.
Reserve funds can be critical safeguards when starting a business but not just when it comes to ensuring that you have the money to keep a business going through a rough patch or two. Sure, being able to support a business during an economic downturn or a slow period in sales can be critical to getting through those first phases of a business startup and development, but reserves can be important in other ways too.
Having reserves in place that are personal and that aren’t linked to the success or failure of a business can come in handy should things not go the way you planned. That backup source of funding can ensure that you still maintain a normal lifestyle or maybe even try a new venture should your first entrepreneurial endeavor go under.
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The author is not a licensed financial, small business, or entrepreneurial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.