At first glance, the words “risk-averse” and “entrepreneur” don’t seem like they’d go together. After all, entrepreneurship is an inherently risky business — insert your mental image of an 80s- era Tom Cruise here.
But in reality, entrepreneurship does still have room for more risk-averse individuals.
There’s a lot more to reducing risk than finding a proven business idea in a seemingly stable industry. Sure, a “proven” business idea is a good start, but the way you choose to run your business will go a long way in reducing immediate and long-term risk so you can have a successful entrepreneurial career.
Embrace Adaptability (And Be Willing To Adapt, Too)
Survival as a freelancer or solopreneur often comes down to being flexible — or being able to quickly pivot, learn and thrive in new ways.
This isn’t just true during times of crisis. Market conditions change all the time. New tech or world events can completely disrupt your way of doing business, or give you an opportunity to streamline your workflow and become more efficient. To embrace adaptability, you have to be willing to make needed changes based on the ever- changing world we live in. You have to be proactive in understanding the trends that could affect both your industry and your target audience.
Don’t let yourself get so bogged down in your routine that it will be hard to transition to a new way of doing things. Be open to new ideas, and constantly work to improve your knowledge and skills so that you will be better positioned to make needed transitions quickly.
Diversify, Diversify, Diversify
If you only remember one point in your efforts to reduce risk, it’s this: you have to diversify.
For solopreneurs, this primarily involves diversifying your income stream and the markets you serve. This doesn’t mean you have to try to become all things to all people. But you should explore how you can avoid tying all of your revenue to a single source. If that income source were to disappear overnight, what would you do?
This became abundantly clear during a recent phone call with Mariah Carrion, franchise coordinator at Frannexus. During our conversation, she explained, “Diversification can be a key defense against risk. When you have more varied offerings or target a broader range of consumers, you will be able to hold your own against competitors. Proper diversification means that no two parts of your business will react the same to the same event. If something happens that negatively affects one part of your business, you can shift your focus to the other revenue streams to keep yourself financially stable.”
For solopreneurs, diversification can be as simple as expanding your client base so your revenue isn’t all tied to two or three clients. Or you might consider introducing new, complementary services that build off your skills. Depending on your niche, you could even use options like a subscription service to create a source of recurring sales.
Make Cash Flow Management A Top Entrepreneurial Priority
This year, a lot of brick and mortar businesses discovered the importance of cash flow management when they had to shut their doors and go without making any sales for weeks, or even months due to the COVID-19 pandemic.
Since then, many businesses have permanently closed locations, furloughed employees, or gone out of business entirely — in large part because they didn’t have enough cash on hand to deal with such a massive disruption to their business.
While freelancers and solopreneurs generally have less overhead to worry about, you should still make cash flow management a top priority. Innovative entrepreneurs are always looking for ways to increase their profits, whether by making more sales or bringing in higher-paying clients.
Perhaps even more importantly, they look for ways to cut unnecessary spending. Sure, renting a private office may be a nice perk, but if you can manage all your work from home, you’ll save a lot of money just by working in a home office — noisy kids notwithstanding.
Continually Invest In Your Business
During tough times, it can be tempting to completely pull back on your efforts to grow your business.
After all, when profits are down, you’ll want to cut costs so that you can keep yourself in the black. For many entrepreneurs, this means cutting out advertising. While this may be necessary for some, try to avoid this “all or nothing” mindset. Within reason, you should actually keep marketing and advertising during tough times. For starters, this will ensure that your target audience doesn’t forget that you exist.
If your competitors are also going through tough times and pulling back on their marketing, your continued advertising efforts could actually expand your reach like never before!
By maintaining a presence, you’ll be able to bounce back faster (and stronger) once customers are in a better position to do business with you again.
Reducing Your Risk For The Future
If there’s one lesson 2020 has taught entrepreneurs, it’s that there’s no way to completely “risk- proof” your business. At the same time, though, it’s also proven how the right business practices can leave some better prepared for challenging times than others.
Don’t be afraid to take the plunge into entrepreneurship. Few things can be more rewarding — and it doesn’t have to be as risky as you might think.