Reader’s question:
I have an excellent idea, but I was reluctant to go for it, because I felt it needed too much money thrown at it. Was I wrong to be so cautious.
No I don’t believe you were. While all a successful entrepreneurs take risks (risks that often seem foolish to those on the outside), rest assured that the successful entrepreneurs will only take carefully calculated risks having done everything they can think of to reduce the downside to an acceptable level. If you were not happy with the level of risk then it’s not an excellent idea (for you at least).
If you still believe it’s a business idea that you want to pursue and feel passionate about, then look for ways to minimise the risk:
- Can you trial it for a fraction of the cost.
- Can you get some orders (ideally with payment upfront) prior to starting to incur costs (you may need to offer a discount in return)?
- Can you reduce the risk by negotiating better credit terms with suppliers?
- Can you reduce your risk by negotiating early payment from your customers?
- Can you create some seed capital by starting a smaller business first?
- Can you run the business alongside your current job?
- Can you share the risk with a business partner or investor?
- Can you insure the risk?
- Can you minimise the risk but carefully structuring the legal makeup of the business?
- Can you arrange to borrow or rent the required assets for startup (for example Richard Branson managed to get a second hand 747 off Boeing with a lease/buy back agreement such that Boeing would buy it back if Virgin Atlantic didn’t fly).
- Can you sell a complementary product to your target market using less capital, once you then know the market, have a customer list and some cashflow developing your product should be less risky.
- Can you license your product to someone else for a share of the profits?
- Can you get another business to enter into a joint venture with you?
- Can you produce your product or service for a lower cost?
- Can you minimise the risk by getting experienced advisors/mentors on board?
- Can you reduce the risk by excluding a section of the market?
- Can use of factoring and debt finance help?
- Can you increase the percieved value of your product instead of discounting?
There will be other ways of reducing your risk, your goal now is to review your business plan and consider the possible risks you face, make a list of them (keep asking yourself “What if…”) and then work out a way of minimising each of them, if after all that you don’t feel confident going ahead then don’t.
Asking John:
Do you have a business question you would like me to answer? If so you can Ask John or you can enquire about using me as a business coach.
This blog is about business opportunities and ideas that I spot, think of or hear about and think are useful and interesting. It is intended to provide ideas and inspriation for you to help you find the right business idea for you to then grow it into a successful business.
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