Starting or having a business is risky wouldn’t you agree? The ‘Risk List’ is a long one:
Your good name...
And that’s just to name a few. So why do you take those risks? Is it for the money? Is it for the prestige? Is it because you just like to live a tortured life?
Or is it because running your own business is an adventure worth taking? Those calculated risks are what make you feel alive. You get to overcome obstacles and challenges on a daily basis and that is where you thrive.
Sure, you’ll be rewarded with money and prestige, but it’s not usually those things that drive you to succeed. It’s the honor of going through the fire and coming out the other side. If you’re like me, you don’t even appreciate the people who compliment you on how much money you made because they don’t get it.
But let one of your peers praise your accomplishment and your spirit soars because you know they see what you see and they have been where you’ve been. They’ve been burnt by that same fire and know what it takes to come out the other side just to face another one.
Of course there are others who go into business strictly to be their own boss. Those who were tired of being told what to do by others. Who thought they could do it better than the ones they worked for. Some of these folks became just glorified employees because their real goal was to work as little as possible and make just a little more than what someone would pay them as an employee.
Hopefully that was not you. I always thought, “Why take the risk to make just a little bit more?” I also realized those same individuals are NOT risk takers.They also are not truly business owners. They prefer living on the fringe of society more or less so I don’t spend any time thinking about them because they’re beyond helping.
I’ve also seen those who want to go into business for themselves because they do their craft so well. They want more benefit from having that skill than the average company is willing or able to pay them. That’s when they find out about the risk aspect of owning a legitimate business. They start making payroll and paying insurance. They purchase vehicles and equipment. They pay for advertising and marketing. They are hiring and firing employees. They try to manage their taxes. They are collecting the receivables and doing the payables on their own. While all this is going on they are also trying to sell enough work to keep everyone busy and make payroll every week along with estimated tax payments.
Here’s another part of that scenario: That skilled craftsman who started this business is still “doing” their craft on top of all the other duties. He still believes he does it best and if he is not doing it the business will collapse. Now that is taking a ton of risk!
A large majority of businesses land up in this high risk, high stress, mediocre performing area of their business. The problem is they don’t know how to get out of it. How to change directions. They’re still making more than if they were working for someone but not that much more. Plus having all the risk and stress of knowing they couldn’t leave their business for two weeks without it falling to pieces.
Then there’s the businesses that seem to have everything running so smoothly and the owner spends a lot of time at the golf course and on vacation with the family. They’re doing charity functions and even running for public office. How is that possible? These are people who know how to transfer their risk and are also masters of delegation.
Let me give you an example of transferring your risk... You walk into your insurance agent's office and your first question is “How little can I get by with?” Minimal coverage does not transfer risk. Instead, to truly transfer risk, you ask your agent to give you the maximum coverage on life insurance, home insurance,car insurance and business insurance.
Right now you’re probably just thinking this is going to cost me a fortune right? You need to know all of your options. If you start low your agent will never break out the big package in fear of scaring you with price and you may never have exactly what you need. What you’re going to do is then walk backwards from that high quote and coverage to get exactly what you need. What insurance does is transfer risk from you to the insurance company, so why would you want to have minimal coverage? If something big happens to you why should they only pay a small portion of it and leave you responsible for the large portion?
The peace of mind alone knowing you have the max covered is what transfering risk is all about. Same goes for the car insurance, health insurance and last but not least your business insurance. It’s hard to fully understand the nagging stress of you being taken down by a simple insurance claim. Life insurance is a prime example. If you have a family, what is the dollar amount you want them to have if you check out? What is going to maintain their current lifestyle plus any other options that may come up during their lifetime that you will no longer be able to provide for them?
That is transferring risk. I hope it makes more sense now to you. So now let’s go into your business itself to transfer risk. This is where delegation plays a large part. The more tasks of your business you can delegate to others the lower the risk is to you. The more hats you wear the greater your risk. You’re not an expert in everything so find the best people for the ones you’re not great at. Let them develop a system to handle those duties and train new employees. Now you have people who are held accountable. When there’s a problem with their department you put it on them to resolve. This is transferring risk. You no longer have the stress and responsibility of completing that issue on your own.
Minimizing your debt is another way to transfer risk. Having proper safety procedures is another risk transfer. If you’re a roofing contractor and your crews are not tying off with the proper rigging gear (or none at all) you are at risk. If you have drivers who don’t have a valid driver's license you are at risk. If you don’t have adequate liability insurance on the job sites that could be disastrous.
Being a risk taker is part of being an entrepreneur. But being a foolish risk taker is not. Start looking at your business to see where you can transfer risk. Don’t get caught up in the cost. focus on the immediate peace of mind and the long term savings by avoiding huge unnecessary costs incurred by lack of risk transfer.