|
|
Like this article? PLEASE +1 it! |  |
|
Two Ways for Entrepreneurs to Manage Risk and Avoid Losing Their Shirts
Written by: Andrew NeitlichArticle Overview: 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.
 |
Free Download - Eight Attributes of the Successful Business and Executive Coach By Andrew Neitlich |
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.
SME's - a link between funding and a compliance model
"Skivvies Are the New Civic Duty"
Business Literacy Stimulates Entrepreneurial and Personal Mastery—Part 1
The Myth of Entrepreneurial Risk-Taking
How to Make Your Website Successful: 5 Web Usability Tips that Will Boost Your Conversion Rate
Related Forum Posts
How to valuate a business
- Hi Garth - here is how we did it at Northern Crown Capital when I was helping them raise venture capital for Toronto-based entrepreneurs. Assume the start date is 2003 so 2008 projections are 5 years out:
How Northern Crown Capital Valuates a Business
2008 Financial Projections
Earnings Before Tax
$5,865,000
Tax Rate
42%
Taxes
$2,463,300
Net Earnings
$3,401,700
Amount Seeking to Raise Today
$3,500,000
Discounted Value of Future Opportunity, 5 Years Out
2008 P/E Ratio
15
Value of Company in 2008
$51,025,500
Discount Rate Applied
30%
Year 2008
$51,025,500
Year 2007
$35,717,850
Year 2006
$25,002,495
Year 2005
$17,501,747
Year 2004
$12,251,223
Value of Company at Investment in 2003
$12,251,223
Less: Investment Amount
$3,500,000
Present Value
$8,751,223
Discount for Risk & Private Company
40%
Less: Discount for Risk & Private Company
$3,500,489
Private Company Value
$5,250,734
Present Value (What the Owner Keeps)
$5,250,734
60.00%
Financing (What the Investor Gets)
$3,500,000
40.00%
Total
$8,750,734
100.00%
I hope this helps!
Show the Benefits
- Offer a free test drive of the Product or Service with a Money Back Guarantee - Take the Risk out.
This will help them make the decision but you have to work with them to realize it by explicitly state the benefits they are receiving.
Re: Search Engine Friendly Web Development
- I would like to add some more things in search engine friendly web development.
1. PPC campaign
2. Viral marketing
3. Social Media Marketing
Avoid flash in website and other use CSS files to shows the content style.
CEOs and Email - Slaves?
- I wonder if the emails they are responding to are filtered thru their assistants first 'cos they seem to spend a lot of their off hours responding to them.
True they are successful but I'm not sure I'd be willing to pay that price.
I'd be interested to know what's the in the typical day planner of Entrepreneurs on the Forum.
Entrepreneurs are a different breed than Paid Employees- so it would be interesting to view the contrast.
Richard Branson's Book
- Richard Branson's Book "Losing My Virginity" is a must read for people starting their own business.
Share this article with your friends. Fund someone's dream.
Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.
by: Casey Gollan, Melbourne Business Coaching
Lesson #3: “Tell ‘em quick and tell ‘em often”
Searching for the Stars: How Yang and Filo Took Their Business to New Heights
Salesperson Wimp-Out: I Need Help 
February 2012 Top 100 Leadership Experts to Follow on Twitter
Please Stop Calling it Coaching!
Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!
Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.