The importance of risk management for business owners

The most successful business owners are the innate understanding and risk management. This article evaluates four different businesses in relation to the risks involved in risk management.

The risk concerns the general impact and probability of a specific exit. For example, a 20 percent probability is a $ 100,000 loss ($ 20,000), while a $ 10,000,000 gain is $ 100,000. The smart business owner continuously evaluates the risks inherent in his business in order to minimize potential disadvantages and maximize potential up.

Otherwise: It is wise to invest in businesses and business that are most likely to have upside down and minimal disadvantages. Although this seems obvious, if it is explicitly stated, many businesses work with the opposite principle. That's why many entrepreneurs are investing in saving a life in a business just because their dreams are crumbling.

There are four different businesses and risk profiles:

One: Online publisher. This business develops online distance education programs for fitness professionals. In order to manage the risks and avoid large investments, product development will start with a simple, one-invested e-book. Try ebook on a cheap website. If the ebook sells at a good price, the company invests in an expanded program with a hard book, DVDs and seminars. Try different marketing strategies and try well-designed strategies. In short, this business can achieve excellent profit through a low-cost testing and implementation strategy. At the same time, it focuses on products with a market share (fitness) in order to offer new products to their loyal customers at a much lower marketing cost.

Two: Mortgage Brokerage. While almost everyone and his brother started mortgage companies in the first decade of the new millennium, only a few gained profit. In this business, the owner has more than twenty years of experience of initial loans to one of the world's most important financial companies. He had a remarkable relationship with lending companies, the industry's top salespeople, a proven approach to closing business, and a serious understanding of his client. He listed four outlets he knew – just on a commission basis – and showed his show at nominal cost in the area of ​​his house. Within a month, they produced more than $ 100,000 in prizes, which were virtually no development. Here, you see a business that creates a high yield with nominal risk.

Three: Event performer. The promoter placed on a fast-growing market for professional combat events. It costs more than $ 85,000 to get an event, and most of this money needs to be paid first – before each payment. It was almost impossible to sell a ticket a night, because most people bought tickets two weeks before the event. The competitive event, the bad weather or the resignation of the event by the participant can be costly and stressful. An event return from $ 150,000 to $ 60,000. In short, this business had very unpredictable returns with a high prepayment (eg Risk). The promoter depended on the spell of business and hoped to cover your business and sell it on the road that is interesting in an exciting lifestyle business in a fast-growing industry. However, does it make sense to rely on the recovery strategy without predictable cash flow?

Four: Fitness facility. Fitness equipment typically requires a large front investment to buy equipment. This owner has launched a moderate space and equipment and finances it at an excellent price. He then seriously sold the customers to generate ongoing costs to cover their financing costs and rental costs. After six months and thanks to its efficient and aggressive marketing, it was even able to break its outgoing cash flow. After a year he was profitable and prepared for a second place. He managed a manager to lead his first place to repeat the cycle for the second time. In this case, the owner achieved an excellent return, despite the fact that the large investment needs started from the beginning.

From the examples above you can infer the following rules for successful risk management:

* Test products and marketing strategies before investing huge amounts. Only open when the strategy is proven. If a business requires a huge forward-looking look for an unproven investment, do not invest it.

* Find and buy outstanding talents who understand the business and create exceptional results – while leveraging leverage for the business owner.

* As Warren Buffet advises, only enter into business that you understand and know. If you do not know the business and still want to get it, spend a lot of time on research.

* Find the businesses where cash comes in before it comes – and not the other. Where possible, minimizes leakage.

* Find business from annuity flows from recurring fees, membership fees, and high customer loyalty.

* Do not invest in businesses that require high risk and offer moderate yields (for example, a promotional business). Rather, we look for or treat this low-risk and high-yielding business.

* Must work flexibly and flexibly against business cycles; fixed costs are low.

* Avoid business activity instead of spell instead of steady cash flow.

* Developing systems that enable business growth and expansion.

* Buy with profit, not profitable. Thus, market downturn will only have minimal impact on investment.

Source by sbobet

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