It could be said that an entrepreneurial spirit is often an inherited trait. Like many entrepreneurs, I grew up in a small business household where I watched my father’s small carpet store become a healthy chain of around 15 locations. The reality of life as a small business owner was a typical kitchen table conversation in my family.
When I was seven or eight years old I was asked to write a report about what my dad did for a living. Where my classmate’s parents had easily identifiable jobs like “lawyer” or “nurse,” I struggled to find a simple way to sum up “retail carpet store owner.”
“Tell them that I’m an entrepreneur, Stevie” was my father’s response. When I asked what that meant, he explained that an entrepreneur was someone “who took a risk with money to make money.”
I have heard many definitions of the word entrepreneur since, and many are quite good, but my dad’s characterization is still my favorite. It combines the essence and thrill of entrepreneurship – it illustrates that going into business requires risk, but also the possibility of a payoff if done well.
In the years since that conversation with my father I have learned the best entrepreneurs strive to reduce the inherent risk of running their own business whenever possible. It’s impossible to eliminate risk entirely, and you probably wouldn’t want to because risk is what makes it possible to grow and achieve new levels of success. But the smartest small business people learn to reduce risk, and, even then, to make sure that the risks they do take are well thought out and worth the potential loss.
How do they do that? Here are a few ways:
1. Court bigger, more stable customers and clients: There are many factors that are outside of the control of the small business owner. The economy surges and dips. Clients’ needs change. One way then to counter the constantly shifting business cycle is to work with stable corporate and government clients, when possible, because bigger customers can lead to bigger budgets and long-term relationships.
2. Create additional profit centers: If having bigger and better customers helps stabilize your business cycle, it should follow that having additional products and services can also help by diversifying the kinds of clients you serve.
Starbucks is a simple example of this kind of development. Originally the company only sold coffee beans, but they soon added coffee drinks. Then, capitalizing on an opportunity, they added Frappucinos to boost warm weather sales. And then food, music, and so on. Small businesses can use this same method to grow their offerings. By analyzing the market segment that you’re supporting and adding additional products and services to your offerings as opportunities arise, you increase the chances of making more sales in both good times and bad.
3. Establish proper legal status: It may be tempting to leave legalities for the future while you get your business up and running but delaying those steps may leave both you and your budding endeavor vulnerable. Incorporate right away. Establish business credit apart from your personal credit. Make sure you have enough insurance.
Yes, risk is part of the game, but if you play your cards right, you can ensure that your company grows and returns the investment on the time, work and care you put into it.
About Steve Strauss
Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can also listen to his weekly podcast, Small Business Success.© Steven D. Strauss.
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