Can Small Business Finance Risks Be Measured?

Managing business finance risks is a top priority for some small business owners, but there are a number of reasons why this activity is not even considered by a large number of small businesses. Some of the possible explanations are noted below, but business risk is an unavoidable and critical issue regardless of the rationale for not actively taking steps to curtail it. The fact that many of these risk problems could be totally avoided with a nominal amount of effort in most cases only adds to the potential mystery of why there is not more risk control at the small business level. Here are three possibilities to explain what might be going on when many small businesses largely ignore risk management:

  1. A trusted advisor, banker or manager suggests that it is not necessary to be concerned.
  2. There is a lack of understanding as to why it might be important to analyze financial risks for commercial financing.
  3. Time management issues have led to a conclusion that there is not enough time to worry or do anything about this.

In addition to these three reasons, each company can have numerous unique factors that contribute to risk measurement being assigned a low priority. Two explanations that have been heard more often since the recent banking crisis are a variation of the following questions:

  • If the big banks cannot manage financial risks, what hope is there for small businesses to get these complicated problems under control?
  • If my banker is not able or willing to help with managing the business financing risks, who can help if there is not a qualified individual in my company to do this?

Because of questions and realistic concerns like this, it is not surprising that the issue ends up on the back burner. But that does not mean it is the best solution for handling the problem. Business finance risk management often requires personal involvement before a small business owner understands what the issues and problems are. This is not unlike many situations in which active participation leads to better comprehension of the subject matter. It seems to be true whether we are talking about learning a foreign language or getting a better grasp of how to reduce business risks. Here is an anonymous quote that helps to reinforce this observation:

  • “I hear and I forget. I see and I remember. I do and I understand.”

As a final note regarding the question asked in the title of this article, commercial borrowers and business managers are likely to have more success in assessing business finance risks if they assume a personal and active role in risk management.

5 Steps to Overcoming Challenges of Starting a New Business

There are arguably millions of people who would like to start their own business, but they are hesitant because they have no experience, statistics suggest that most new businesses fail within a few years, etc. No matter what those fears are, the following five steps will help readers overcome them and turn their entrepreneurial dreams into reality.

Step one: Know how to find a niche.

Prospective entrepreneurs should be able to confidently answer the following questions:
• Is there an untapped market out there for the proposed service and/or product? For example, a person who is known for baking great chocolate chip cookies would do well to start small and focus on selling exceptional chocolate chip cookies. A signature item will establish a brand. Product lines can always be expanded after a business takes off.
• What are some “extras” that will keep customers coming back for more?
• How will the proposed service and/or product be better than what is currently available elsewhere?

Step two: Know how to handle customers.

Simply being passionate about a service/product is important. However, business owners should also be able to interact with their customers in a professional manner at all times. Bad news travels fast. Rants from a few disgruntled customers can kill a business before it gets off the ground. Thankfully, there are several books, webinars and seminars that can help teach readers/participants how to successfully communicate with various personality types before and after they start their business.

Step three: Know how to network.

No matter how passionate and talented a person is, no one is going to take notice of his/her business until the company name starts popping up in conversations. So, the owner will have to act as his/her own publicist in order to generate buzz and revenue. New entrepreneurs will also be better able to grow their business and expand their knowledge base by using social media, attending seminars and studying their competition to find out what clients like and do not like.

Step four: Know the rules and regulations.

Proper business registration is mandatory, no matter if the business will be run online or offline. Therefore, contacting state and local government officials to find out about necessary licenses, permits, zoning requirements, etc., is imperative before starting a business.

Step five: Know that education does not always trump experience.

There is nothing written in stone that says a person must have a college degree in order to run a successful business. For example, Martha Stewart has no formal training as a chef. She simply decided to start a catering business. Today, she is a household name. Those individuals who prefer to hone their business skills via educational programs can, of course, do so online and offline. One of the perks of formal training is that more people will be willing to take a chance on a novice if he/she has impressive credentials.

By utilizing these five steps, future business owners can avoid some potentially costly pitfalls and focus on building their brand.

Home Business Questions Only You Know The Answer To

If I said it once, I said it a thousand times. It seems almost everybody wants to start their own business.

Can you blame them?

But another thing I’ve always said was that anyone can go out there and get a regular job to fill up the hours in the day and put some money in their pockets; however, it takes a certain type of individual with the enthusiasm, inventiveness, and character to start their own business.

In other words, they do what they say they’re going to do.

Now before deciding on ways to make money at home, or starting your own home business, you must ask yourself if you’re capable of working for yourself.

Here are some serious questions you need to answer before you consider starting.

1. Are you able to motivate yourself? You must understand that working at home means having no one to drive or motivate you. You must be your own motivator.

2. Are you capable of admitting your mistakes? It means that no body else will pay for mistakes you make. You must pay for them out of your own pockets.

3. Are you willing to work far into the night without first punching a time clock? Understand that you’re not getting an hourly salary and certainly not getting overtime. If you think that going into business for yourself allows you to work only when you feel like it, then you will not succeed.

4. Do you understand elementary accounting? All business is simple arithmetic. If you don’t know the basics, then you need to brush up on it even before you start.

5. Are you capable of saving money? If not, then you had better work for someone else, because some of your profits must be saved for expenses and growth plans. If you’re a person that has never saved any money, the chances are you won’t when you start your own business.

6. Could you carry on your regular job while getting your home business started? Many people quit their jobs even before starting their own business. Only to realize that they have to look for another job to have money coming in. Unless you have one (1) years salary saved up, it’ll be smart to build a sturdy new bridge before burning the old one.

7. Do you like people? This question is often the one ingredient that makes businesses successful, whereas the lack of liking people will cause doom. Customer service is very important in business. You have to be a people person which means meeting, and exceeding, their needs at times. Unless you are as genuinely interested in serving your customers’ needs as you are in fattening up your own bank roll, it would be wiser for you to work behind the scenes in someone else’s business.

None of these questions are new.

They’ve been asked countless times and answered countless time by various business seekers.

Yet more businesses fail due to the fact that one, two, or all of these point were not met or were underestimated.

To start your own business may seem like it’s glamorous but the fact is that it takes much more work than if you were to work in a regular job.

Entrepreneurship is NOT for everyone.

And before you start your pursuit of a small home business, you need to seriously ask yourself these questions to truly find out if it is for you.