What is one risk management tactic you implemented during the early stages of your business to protect you and the company?
The following answers are provided by the Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.
A. Voice the Red Flags
Every business has red flags that indicate trouble -- trouble with a client, a process, a staff member or a vendor. Training your people to voice the red flags is imperative to addressing them early, so they don't become problems that expose the company to real risks. Empower the people on the front lines. Reward them for using their voices.
- Corey Blake, Round Table Companies
A. Hire a Tax Advisor
The rules and regulations regarding small business taxes are complex, and it's too risky of a proposal to go without a tax advisor. Get yourself a qualified tax professional on board so you can focus on other areas of your business that need your attention, such as building revenues, marketing and customer service.
- Andrew Schrage, Money Crashers Personal Finance
A. Mind the Cash Flow
Be conservative and conscious of cash flow. We made sure every vendor we worked with allowed us to pay in 60 to 90 days. By doing this, we shifted risk to the long term, and it also allowed us to better manage cash expenditures each month.
- Ben Rubenstein, Yodle
A. Have Good Contracts
I've learned the hard way before, but you've got to have clear contracts that protect the company first. Imagine the company is your child. Doesn't it take precedence over everything else? The company is the most important entity because it's your creation, and other people depend on it. A great entrepreneur puts the company first over his or her own ego and immediate needs.
- Andy Karuza, Brandbuddee
A. Create an LLC
We created an LLC for the company. One of the main benefits of an LLC is that its owners have limited liability, which means they are not personally liable for the debts and liabilities of the LLC (under most circumstances).
- Phil Laboon, Clear Sky SEO
A. Get Lean
Use the Lean Startup method to validate the riskiest assumptions around your product concept. Most startups fail because they waste a lot of time and money building something that nobody wants. This way, you can validate or invalidate your idea in a matter of days and mitigate your risk immensely.
- Danny Boice, Speek
A. Insist on Down Payments
We were fortunate to partner with some major brands when we started. Normally, payment terms go in favor of the bigger company, but this can create a major cashflow risk. We insisted on 50 percent down payments before we would go to production. We are three years in and still haven't made a custom watch without receiving at least 30 percent of the payment up front. You get what you negotiate for!
- Aaron Schwartz, Modify Watches