Yes, running a business IS about making money…and, yes, it does take some spending of money to make money…and, yes, there is an element of financial risk in just about everything we do in our home businesses—but that doesn’t mean that we shouldn’t keep an eye on the financial risks that do present themselves and try to keep that risk to a manageable minimum.
What constitutes financial risk? Well, you will want to keep an eye on the expenses, or course, but you will also want to keep an eye out for areas where you are considering growth or expansion to make sure that you are not risking too much of what already exists in your business. Ask yourself what you might stand to lose when you are considering making decisions that will affect your business. Debt is another area that can provide a big risk—if you are carrying too much debt, a downturn in revenue can put the entire business at risk. While it may seem manageable when you incur the debt, consider what could happen if things in the business change. This is part of assessing your financial risks.
Other things that might influence financial risks—taking time off or a long vacations, changes in family situation, the need to purchase new equipment, or adding additional employees or services or product. Not only should you evaluate the risks prior to making moves and decisions in your business, but you should also keep an eye out periodically and ongoing. What starts out as a minimal financial risk can easily make a turn for the worse (or better) if other things change in the business. Budgeting is not enough as you need to keep an eye on cash flow and potential loss while not being afraid to take the necessary risks to build a business.
See Also: Investment Risks
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