If you don't invest in risk management, it doesn't matter what business you're in, it's a risky business.
As an entrepreneur, you’ve got plenty of worries on your plate, and it’s a major part of your job to handle problems as they come.
While there are no guarantees for business success, one easy way to avoid a major setback or even an early end to your business is to take extra precautions in order to lower any risks to your business.
Unfortunately, it’s impossible to truly eliminate risk when it comes to economic decisions that are best for your business. You have to make decisions even when you don’t know all the facts and are unsure of the future.
So how do you handle these uncertainties when trying to make informed, smart decisions for your business?
Here are 10 ways to manage risk in uncertain economic situations:
1. Think Through Multiple Scenarios
You’ll never have 100% of the information you need to make a decision. The goal is to manage the risk and make calculated decisions. Thinking through at least three different scenarios – best-case, likely-case and worst-case – helps you understand potential risks, and make better plans.
2. Imagine The Worst-Case Scenario
Paralysis by analysis can cause unnecessary indecision. Asking yourself, “What is the worst that could happen,” can put circumstances into perspective and help you be more decisive during times of uncertainty. Oftentimes, the worst-case scenario is not the end of the world.
3. Build Your Reputation
While achieving short-term success is great for your business, it’s more crucial to keep it running for a long time. You can do this by building your reputation. Having a great reputation lets your clients trust your company, thus maintaining your business is easier.
4. Trust Your Intuition
Do search for data and facts, learn from historical businesses or projects, apply SWOT (Strengths, Weaknesses, Opportunities and Threats), calculate risk and make a Plan B for consequences. BUT… don’t forget to listen to your intuition. What does your gut tell you to do?
5. Accept and Embrace Change
The market keeps changing, in good times and tough times. Accept this change and be able to pivot when needed to adapt to the new “normal”, new regulations and other conditions. Get in the habit of experimenting and innovating in easy times, so during tough times change is not as scary.
6. Implement a ‘Stop-Loss’ Formula
For example, if you lose X amount of money, you need to stop spending Y amount until you get to Z result. Be clear on your strategy. You can create a report or an Excel sheet where you follow these numbers.
7. Don’t Rely on Institutional Help
As much as the big banks and governments say they want to help, always remember that as a small business owner you are on your own. Create your own contingency plan, contingency savings, retirement plan, etc…
8. Have 3-6 Months’ Operating Expenses in Cash
Make sure you always have three to six months’ operating expenses sitting in a cash position for difficult financial times. During a crisis – you might need this money to survive, or to use it for strategic business growth.
9. Get Insurance
One of the best ways to reduce business risk is by getting insurance. You can find an insurance package for almost any risk in your business. Getting insurance allows you to protect your business when an accident or natural disaster happens. It also gives you peace of mind because you know you have something to fall on in case your business hangs by a thread.
10. Know When to Cut Your Losses
Set a threshold of how far you’re willing to extend your business assets and your personal investments, document this information, and then commit to sticking to it. Sometimes you have to change the plan, but other times you need to stick to your boundaries and know when to cut your losses in order to save your business.
Now It’s YOUR Turn
For five minutes… come up with as many ideas as you can… what can YOU do manage risks better in your business?
Let's Brainstorm
Please share your ideas (all of them or just one) in the comment box below… and let’s get WOWing.
Live fully, stay awesome,
Nisandeh Neta
Top Commenters – last 30 Days
Let's Brainstorm
Please share your ideas (all of them or just one) in the comment box below… and let’s get WOWing.
Live fully, stay awesome,
Nisandeh Neta
26 comments
I have a job with a company. And I have my own business. I am making a buffer of a years salary/ profit. That is security for me. But I also have to let go of security and take a risk/ chance and have faith I can make it on my own. This year is my year. But letting go of security is a major thing for me. I know! I am working on it. The universe is taking care of me.
26 comments
I have a job with a company. And I have my own business. I am making a buffer of a years salary/ profit. That is security for me. But I also have to let go of security and take a risk/ chance and have faith I can make it on my own. This year is my year. But letting go of security is a major thing for me. I know! I am working on it. The universe is taking care of me.
376 comments
I started as an Entrepreneur just before COVID hit off with a number of very prosperous assignment with the government. But with the lockdown everything shot down.
As I had been an Entrepreneur in my mind and working ethics all my live I did not realize I was untitled to social support so after 6 month I was through my savings. This made me serious start with Airbnb.
Since then I never put all my eggs in one basket but spread my earnings over a number of different things: assignments, Airbnb, long term rent, trainings and now I am looking into the creation of products for online selling. I always listen very carefully to what keeps my customers awake at night and see how I can generate products, trainings etc to ease their pain. So far that works well but I can and will do more in order to reach financial freedom.
In session #5 of the Conscious Entrepreneur training we learned all about the power of a healthy ROI. I will use all the tips to go analyse all my activities and map them against the ROI principles in order to generate a financial healthy and efficient business.
201 comments
1. Have a plan A, B and or C
Especially when you take on something new. Think ahead.
2. Don't fall for the "do not think negative" trap
Of course it is very important not to think only bad things can happen. But some people take the self forfilling propthesy too far.
And try to drag you with them.
It is more than normal to have a bad/ worse case scenario and be prepaired. Having done that, you can relax and start thinking positive
3. Part ways with people that take risks without a back up plan.
4. Do not depend on one big client.
If that client stops, you have nothing to fall back on.
5. Do not have too much clients.
6. If you are a coach or consultant, make you not to be dragged into personal shit.
7. Do not ever take on clients that are doing "criminal" actvities. If you smell something is wrong. Leave!!
8. Make sure you are always able to get out, for example if you have a working relationship, a membership of some kind that
cost a lot of money.
9. Make sure, you have a written agreament
94 comments
We are trying to think the Worst-Case Scenario, but because we are having a product and not a service we can't control currency changes, shipping costs etc. Income is coming from 2 different business but still there are months that are difficult.
160 comments
One of the things to me actually is not to overthink too much. I already had all the scenarios played in my head.
What I learned at Open Circles Academy was to have 6 months of savings set aside just in case something happens, so that I can restart a new business or whatever. I never expected the COVID crisis... I'm flexible so I lived in my dance school for 1,5 years to save money from rent and started a new business alongside. What I learned:
make sure there is a way out in a crisis like this with B2B contracts (since most of the time it's annual contracts).
409 comments
risk management
- My income comes from three directions (three pillars)
- have an insurance for what (through me) happens to others.
- have an insurance for myself
- low costs
477 comments
Always stick to your goal/vision and your most important values and continuously change your plan of approach.
Reinvent yourself every three years like Apple did under Steve Jobs. He stuck to his two most important organizational values of beauty and simplicity and came up with something new every three years. Apple is an example of one of the strongest brands in the world and what do you see now? In these uncertain times, Apple's shares are rising. How strong are you as a company during a crisis?
Keep following trends to anticipate a crisis.
Reliability is indeed the best insurance during a crisis. Stay true to what you stand for, which is sometimes not easy. Your environment judges you mercilessly if your behavior when things are going well for you is very different when things are going badly for you.
112 comments
Good subject. Not all my eggs are in one basket.
I do have an insurance for liability claims in my company.
I have a partime job which will cover most of my income in case I am not able to work anymore and it creates a small pension.
And I create some passive income in various streams.
I have also two pillars individual consults and courses.
Besides the trainings I have to follow to keep my license, the insurance and website hosting I have only costs for a working space when I need it.
328 comments
Well done @Dunja. You give a great example how to handle this topic.
Very Inspiring and clear!
69 comments
For me #2 was life changing. When I was struggling with the thought of starting my own company 18 years ago, someone asked me what would be the worst that could happen?...to start for a Boss again...so I had my own answer.
Next to that I add: continuously educate yourself. Don't be dependent on Just 1 skill or trade. When that goes down, you have other opportunities. Having more than one horse to bet on. (And I know I like to live with FOCUS, but it can be combined)
328 comments
Great suggestions @Frans.
So what would you educate yourself on? to learn another Expertise or Skill? Or to have multiple businesses?
276 comments
Start small first. Big later.
When asking someone to help. First give a small assignment to see if the cooperation is going to work.
You already wrote it, but have a financial buffer. It just feels less like a risk if things are allowed to go wrong.
Communicate. I think most of the damage is done with bad communication when something does go wrong.
328 comments
@Max : thank you! Love all of your 3 idea's.
And yes! the last one... I never thought of "Communication" to be a Risk Management Issue, but you are so right. Thanks!
576 comments
1. Don't depend on one platform.
2. Don't depend on one customer.
3. Don't depend on one product or income source.
4. Don't depend on you.
5. do a risk analysis: make a list of your risks, then next to it put down how much impact it will have on a scale of 1-5 and how much it will cost IF it will happen. Multiply so you can see what is the biggest consequence. Then put next to it how much time and money it will cost you to prevent it and only then decide where to focus on.
To explain:
1: Don't depend on one platform. I used to have an income stream that was making me quite good passive income. I was growing fast. And suddenly something happened, and the platform decided to kick me off. I was back to NOTHING. I will never be dependent on one platform alone ever again- and prefer to have it in my own hands.
2: One big client can swallow all your resources, can be demanding because you are depending on them, and worst is if you lose them you could suffer. So preferable don't work for one client but try a few slightly smaller ones.
3: Working for 101 werkvormen I had one stream of income: giving live trainings. When COVID came and we had to lock down, I couldnt do anything anymore. I started with a few different income streams and now I make money in a few different ways. If one of them falls, I still have others left.
4: I work together with my sister. In principle, I do everything alone, and so does she. But whenever I book a training or a meeting, I tell her and she reserves the place in her agenda, and I do the same for her. This way we can cover up for each other.
5: A risk analysis makes it so much more calculated and necessary. Thanks for bringing this topic up, I used to do this a lot (and this is, btw, exactly why I do NOT have insurances)- I never used it in the past years but I will do this again, although at the moment there's not a lot to cover for:)
718 comments
Your point #5 is a very good one, Gerdy.
If you manage your risk well, you probably don't need many of the insurance products that the insurance companies would be happy to sell you.
BUT...
Not every risk can be completely eliminated (e.g. a traffic accident)... and if the price is high (liability to third party, or loss of ability to work), ... I would consider A type of insurance...
It doesn't have to be an official insurance policy from a company.
328 comments
Brilliant ones, @Nisdandeh. WOW !
I love your last 3 suggestions without being depended of the "Official" companies to do it.
328 comments
yess @Gerdy. I love your examples, especially with your sister. Great one!
Totally agreeing with not depending in ONE (of any thing!). Thanks for sharing and keep it coming! I missed your comments on some of the topics! Thanks so much!
175 comments
When I opened Nisandeh's mail, I thought OMG I don't know anything about this subject but I am very aware of the importance... However I was surprised my brain came up with some good points 🙂
I think it is better to make your scenarios (as Nisandeh mentioned), more specific:
1. In this scenario, what is the impact on the my clients? What does it cost me to solve the problem? What is it I must do to keep the client happy and fix my reputation?
2. The probability of every scenario you make is important as well. How likely is it scenario A - B - C will happen?
3. How hard is it to stop or change scenario A - B - C?
Some other thoughts:
4. Outsourcing to experts is not only a way to save time, you also share the risks: when a big concrete gravestone show cracks after a year, my concrete supplier is responsible. Same for damages during placement on the graveyard. Of course you have to make good agreements with you suppliers.
5. Quality control is very, very important when it comes to selling physical products. Saves you lots of time, money and clients.
6. Work with protocols, but at the same time look beyond (never forget the latter when you work as a doctor or in other medical professions)
7. Use disclaimers (I download them for free from the designers' association. Ohter professional associations (beroepsverenigingen) might provide them as well)
8. Make sure your clients sign the order agreement. By email is legally valid too.
9. Always give your employees and interns clear and detailed briefings.
10. Only work with suppliers you can rely on.
11. Always work with quality tools and machines (it reduces the risks of injuries and damage)
328 comments
Woww @Ine! Amazing tips and idea's! WOOW! You know alot and I am printing out your tips! Keep up this great work!!
328 comments
Pieuw... This one is a heavy one. I immediately feel the urgency of this Topic. Let me sleep on this one for a night or so.
I love your #3, #4, #8 and #10.
Just a question for you about #9 :
Which kind of insurance do you think I need to take/get if I am just working as a trainer/coach with a small team of Freelancers/VA's?
Because I don't see any thing that I really could get to insured? Can you please explain?
718 comments
I’m not saying that EVERY entrepreneur needs insurance, and I’m definitely not an expert or even knowledgeable when it comes to insurance…
But, for example, when we had our training company doing big live events we had a special, quite expensive, insurance in case something happens to anyone during a training.
And… since I was the main reason why people paid us, I had a very high life insurance to protect my wife and the company in case I die.
On the other hand, we considered and chose NOT to take a disability insurance (in case I stay alive but can’t do my job), because the ratio of premium to compensation didn’t make sense.
Oh… yes… luckily we listened to our financial advisor and took employee insurance (or whatever it is called), which was extremely expensive… but when we had a disgruntled employee that decided to get “sick” on us for over a year… the insurance paid her salary instead of us… pfew… that was a close call.
It might be that in your case insurance isn’t a big thing, Aramik, but when you ask yourself what can go wrong (like dying or disability or employees getting “sick”) then you might want to put some measures to protect you and your loved ones (and possibly your company).
I’m sure in your huge LinkedIn network there’s an insurance expert that could advise you better than me…
328 comments
First of all: Thanks a Million @Nisandeh for your advice. I love your questions and I have put a Implementation Follow Up to do a research for a trusted advisor on this matter. Thanks a lot, You opend my eyes to some pretty unknown matters.
718 comments
I understand Aramik, that risk is a heavy topic…
But like I wrote in the first headline of this article “If you don't invest in risk management, it doesn't matter what business you're in, it's a risky business.”
This is from experience…
If I were in your shoes, the biggest risk I’d consider manage is the fact that everything you do (and you do so much) depends on other people’s platforms… LinkedIn, Facebook, YouTube… and nothing on your own platform (e.g. a website).
You have no control over any of these platforms, and they can change their TOC in a moment notice.
I lost ALL my passive income at the beginning of my path when I made one small mistake with Google and didn’t get their warning email… so they shut my Adsense account for good, without a way to appeal. That was 20 years ago… but it’s still a lesson I hold close to my heart.
I know personally 4 companies that got all their leads for years through Google Ads and 6 others that got their leads through Facebook ads - and ALL of them lost most of their business when those big companies switched their focus from small businesses to huge businesses and the leads they generated became too expensive.
I can go on and on with examples…
There is nothing wrong with using other people’s tools and platforms, and the fact that you use at least 3 different channels - gives you some protection - but we’re talking about risk, and risk management…
If I were you - I would definitely look for a strategy that creates also something that is mine.
328 comments
Thanks so much @Nisandeh. This is gold!
It's absolutly a Risky Business! Thanks for sharing all your experiences. It's so valuble for me to read and learn from you.
Totally agreeing with your comment about the platforms. Thank you!
So how would you strategize my Online Membership and Community Area? That's my Virtual Real State and All of my leads fo through that platform. That platform is called "Huddle" and is like Kajabi, an Online Learning Platform that is "mine". Would you consider it to me mine or would you advice build one my self?
718 comments
If I understand correctly, Aramik, you are using - LinkedIn, Facebook, Youtube, and Huddle... correct?
Those are all different platforms owned by different companies - and so are well diversified.
I mean - not all 4 platforms are going to fall at once.
However, I would make sure you have your mailing list with a different provider, and backed up monthly to your computer.
So, if the shit hits the fan - you can easily find a new email marketing provider and upload your list to their servers.
I would also make sure that all your videos that are in your membership platform would be on a video storage site (we're using Vimeo) - so again... if the shit hits the fan you still have all your content in your control.
Personally, I prefer that everything goes through my website...
Not only because I have total control, and in worst case scenario, it takes minutes to migrate from one host to another.
But also from marketing reasons...
When people come to my website - either to read a blog post, watch a video, fill in a form, buy a product, or login to the membership area (the Business University) - they're always in MY "club", with my rules, with my moderation (to keep the conversation safe, health, empowering), with my choice of promotions and incentives, and so much more... Not to mention that I get all the Google SEO "juice" and not some giant corporation...
Just my 2 cents
328 comments
Fantastic these €20.000 advice, @Nisandeh. Thanks so much!
Yes, all of them are different. As for Huddle: that's the one that my clients pay for (monthly,yearly or at once) to be in an online program, training or a course.
Yes, My mailing list is definitely another company, even more: I decided to have 2 autoresponders:
1) My regular mailings and launches
2) Specially for my Huddle-members
AND: I download every 2 weeks, both lists + all of the list we have on Mollie, Plag&Pay and Moneybird (Our Admin systems/money handeling systems) PLUS we print everything on paper every 4 weeks so that we have ALL of the information, just in case, we are not able to go online (As it happend to many companies in China/North Korea/Iran when the goverment Shot down the internet!)
Check: All my video's are on Youtube and on Vimeo.
And yes: I would have the same preferration... In the past, too many of my websites (in which I spent a lots of time, money and effort), went down due to all stuff (hackers) and I was'nt on time with reacting and lost a lots of my content and information. That's why I now prefer just one-page website (opt-in) so that Every thing goes from LinkedIn (or my community) right ahead into my Mailinglijst where every thing is safe.
That's the only reason that I wanted to keep it simpel:
1 Strategy = LinkedIn
1 Community + Online course = Huddle
1 Lead Magnet Generartion = One-pager website (phoenix)
So what would you advice? Keep it this way or build a webiste/domain like yours?
Thanks again and please let me know if you have any other feedback. I appreciate and value it a lot.
718 comments
Risk-wise, Aramik, I think you're good.
Marketing-wise - it's a matter of strategy.
Right now - whenever people see your content anywhere that is NOT your website - as soon as they finish consuming it - they will go away to someone else.
Personally, I don't like it.
I also don't like to drive traffic (either directly from my emails, or indirectly from SEO) to someone else's website.
But then again... this is a marketing strategy issue... not a risk issue...
67 comments
I am a cautious and conservative entrepreneur. Yet I walk off the beaten path but always with a compass, map or GPS. This means that I seek advice in advance, study the subject matter, weigh up the risks, the pros and cons, consider several scenarios or routes, consult with my colleagues and compare ideas with other entrepreneurs. Sometimes I take bigger risks but then evaluation and adjustment are crucial. I also like to remain flexible and don't like to bet on just one horse.
175 comments
Not betting on one horse is a good one, Franck! 8 Months ago I decided to create for my company two main pillars: on the one hand very exclusive individual grave art and on the other memorial products I sell B2B and in my webshop. It feels safer than my strategy before this decision and I think when business is going well I'll add a 3rd one.
16 comments
Seems like you've found a balance between risk taking and being conservative Franck. I think this gives you tranquility.