Roy Ash, co-founder of Litton Industries, once said, “An entrepreneur tends to bite off a little more than he can chew, hoping he’ll quickly learn how to chew it.”
In some cases, entrepreneurs learn to “chew” their work well enough to get by, or even flourish in their industry. But all too often, the entrepreneur chokes and fails.
According to the U.S. Small Business Administration, approximately half of all small businesses fail within the first five years.
With chances as slim as this, it is essential for each small business owner to understand exactly what he or she is getting into, and how to avoid the risks that have the potential to turn any company into another failure statistic.
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6 Biggest Risks of Owning a Business
- Personal Liability: For any small business owner, one lawsuit could potentially result in the loss of a business, or worse – the loss of personal finances and assets. Because sole proprietors are individually responsible for any business claims filed against them, it is absolutely necessary to seek protection with personal liability insurance.
- Insufficient Funds:As many banks are reluctant to lend money to sole proprietors who are lacking a proven track record of success, it can be extremely difficult for an entrepreneur to come up with the necessary funding to start a business. Even if enough funding is obtained for start-up, it is also important to have some extra cash as a cushion, should any unforeseen troubles occur.
- Poor Planning:Too often, the excited and passionate entrepreneur becomes caught up in his or her vision without setting up a business plan that can turn that vision into a reality. It is imperative that a plan be put in place consisting of the company’s goals, potential problems and solutions, a marketing plan, and more.
- Disability or Illness:In the event of a debilitating illness or accident, the unprotected small business owner is left to fend for himself. For a small business owner who plays a number of roles within the company on his own, you can imagine the devastating effects that a long, unforeseen absence can have. Disability insurancecan help you avoid this risk.
- Suffering Relationships:Keeping up with the demands of owning a small business can be exhausting, so much so that many small business owners don’t have time for much else. Suffering from strained relationships with family and friends can sometimes push entrepreneurs to throw in the towel.
- Overly Ambitious Ideals:There is such a thing as growing too much, too soon. A number of small businesses that possess a high potential for success end up going under due to overexpansion. To avoid this pitfall, the entrepreneur must have the resources and funding that is necessary for growth.
These risks and others are vital for any entrepreneur to consider when “biting” into any new business venture. Once the risks are covered, a small business’s chances for success rise exponentially. The eventual payoff of this success is sweet, and well worth the risk.