Stephen Scoggins is the founder and CEO of Scoggins International Inc.
As an entrepreneur, taking risks is a given. But it’s important to approach risk with a plan to eliminate or reduce it.
I have found that it is not enough to hope for the best and assume that everything will be fine. By having a plan to eliminate or mitigate risk, you can increase your chances of success and avoid costly mistakes.
1. Removal of Personal Risk
One area of risk that business owners often overlook is personal risk. This includes risking personal assets and resources such as savings, real estate and investments. It is important to have a plan to protect these assets in case the company fails. Think of setting up a separate legal entity for the company, taking out liability insurance or creating an emergency fund.
Another aspect of removing personal risk is managing your time and energy. I know that as an entrepreneur it’s easy to get caught up in the day-to-day operations of the business and neglect personal health and wellness. It’s important to set boundaries and prioritize self-care to avoid burnout.
2. Business Risk Removal
Removing business risk is perhaps the most obvious area to focus on. This includes the financial risk associated with starting and scaling a business and the risk to reputation and team management. A solid financial plan, including a budget and cash flow projections, can help mitigate financial risks.
Part of protecting your reputation includes being honest and transparent with customers, partners and investors. It also means there should be a plan to deal with any negative publicity or PR crises. Managing your team effectively is also critical to reducing business risk. This means hiring the right people, setting clear expectations, and providing ongoing training and support.
3. Acquisition Assets Risk Removal
Acquisition assets from the business, such as customer lists, intellectual property, and equipment, are acquired over time. It is important to have a plan to protect these assets in the event of a business bankruptcy or takeover. I recommend registering trademarks and copyrights, securing patents and having a solid contract with suppliers and partners.
It is also important to have a plan to exit the business, whether through sale, merger or liquidation. To help create an effective exit plan, accurately value your business and understand the tax implications of various exit strategies.
In addition to having a risk mitigation plan in place, it’s important to continually evaluate and adjust your plan as your business evolves. This means regularly assessing potential risks and implementing new strategies to mitigate them.
In addition, I have found that seeking advice from mentors and industry experts can be extremely valuable in identifying potential risks and developing strategies to address them. It can also help you stay abreast of industry trends and regulatory changes, both of which can help you avoid unexpected risks.
Remember that risk is not always a bad thing. It can provide opportunities for growth and innovation. The key is to effectively identify and manage risks so that they do not threaten the viability of your business.
By having a plan to eliminate or reduce risk, you can increase your chances of success and avoid costly mistakes. I believe that focusing on three core areas – personal, business and acquired assets – can best help you mitigate these risks.
Within these areas, there are several risk aspects to consider, including financial, reputational and operational risks. By evaluating the risks in all phases of your business and addressing each area by developing a risk removal plan, you can address the potential threats that may arise and take proactive steps to mitigate or remove them.
Constantly reviewing and adjusting the plan, seeking expert advice, and staying abreast of industry trends are all essential components of an effective risk removal plan. I hope these tips can help you avoid common pitfalls.