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Two Ways for Entrepreneurs to Manage Risk and Avoid Losing Their Shirts

Two Ways for Entrepreneurs to Manage Risk and Avoid Losing Their Shirts

One habit that separates successful entrepreneurs from unsuccessful ones is managing risk. This article suggests two important tactics that every entrepreneur should lock in place in order to avoid losing their shirts.

First, set a stop loss and don’t invest a penny more than your stop loss. A stop loss is the amount of money you will commit to the business before calling it quits. If you reach your stop loss, it is time to move on to other opportunities.

For instance, the best gamblers bring a set pool of money to the table and quit if they exhaust that pool. Meanwhile, less sophisticated gamblers keep adding money to the pot, thinking that they will eventually catch up. It is these gamblers who lose their houses and families and are addicts.

In my case, I have started around 10 businesses. Two have failed, and could have ruined me if I hadn’t set a stop loss in place. In the first case, my partner and I had a brilliant concept for an online subscription-based service that we thought would make us rich. $160,000 later and we were still struggling to get customers. But we had set a stop loss and decided to move on to other things.

Similarly, I also started a professional mixed martial arts league, setting a stop loss at $150,000. The first show lost $10,000. The second show lost $40,000. Rather than continue, I saw that I’d only creep closer and closer to my stop loss at this pace, and just shut the business down.

To set your stop loss, consider everything you need to invest to get the business started. Then double it. In each of the above cases, despite the due diligence I did, unanticipated expenses and delays still came up every time.

Second, spread your risk. Ask people with a stake in the business to contribute capital, time, or resources. For instance, in the fight promotion business, I did my best to find investors among beer wholesalers, famous fighters, equipment vendors, and people serving the MMA fan demographic. If you can’t find people to share the risk, then it is likely that your concept or business model is not very sound.





Two Ways for Entrepreneurs to Manage Risk and Avoid Losing Their Shirts - To learn more about this author, visit Andrew Neitlich's Website.

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Kim Castle
With nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website

Dianne Crampton
Dianne Crampton is an executive leadership coach, team consultant, author and president of TIGERS Success Series, Inc. Dianne has been helping CEO's and Executives connect their employees to their core values and goals for over 20 years using the trademarked TIGERS team culture process, which stands for trust, interdependence, genuineness, empathy, risk and success. To download a free white paper on behaviors that build strong teams and behaviors that will predictably tear them down go here. - Visit Dianne Crampton's Website

Dave Kurlan
Dave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website


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