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Navigating the risks of small business ownership

debt19389797.jpgThere is a fine line between being a risk taker and being an unwise business owner.Of course there are going to be risks associated with running your own business, but you must also realize that there are plenty of ways to minimize your risks and prepare now to hopefully avoid the worst case scenarios that could lead to the demise of your business dreams.When you navigate the risks of small business ownership well, you improve your chances of being a success and minimize the damage that can be done to your business.

The first thing that you need to do is learn all that you can about cash-flow management.Cash-flow encompasses all the money that both comes into the business (income) and that leaves the business (expenses).You need a system for keeping track of the flow of money.If you have more expenses than what your income can account for, you are going to get yourself in trouble really quickly.You may be able to account for money that is being made, but if your accounts receivable and payable policies allow for too much time before what is owed to you is actually received, you could be a successful business that no longer has enough money to stay in operation.Cash is king.The longer that you spend waiting to be paid, the more strain will be put on your small business.

The risk of being sued can be a high one depending on what you do for business.It is wise to insure yourself against the risks that are specific to your business.This way, you are not paying for insurance that you don't need and you are protecting yourself from the risks that you are assuming.Be sure to ask a professional for help if you are having trouble deciding what you should cover yourself for.Naturally, as your business changes, your insurance needs will change as well.Make appropriate changes to your policy and coverage as your business evolves.While insuring the business is important, insuring key players in your business is also necessary.If there are others beside yourself who play a key role in your business, make sure that they are covered.One of the most highly recommended pieces of coverage is the use of a contractual indemnification clause.This clause will protect you from damages caused by other entities that you do business with.

If you find yourself in the situation where the best thing to do is to cut your losses and get out of the business, make sure that you have set up a contract that covers how you can get out of your obligations and end business relationships.The last thing you need is to be hit hard with fees and losses beyond the negative impacts of closing your small business.If, on the other hand, your business is growing, you may need to consider changing your business's legal structure.Business growth brings with it additional risks that you want to make sure you separate yourself from.By forming a corporate legal structure, you can separate your personal assets from those of the business and thereby protect yourself in the case that the business is sued.If you are still a sole proprietorship, you stand to lose not only your business but also your personal assets if someone wins a case against you in court.While there is no way to look into the future predict exactly what you need to protect yourself against, there are plenty of precautionary measures that you can take to navigate your risks as a small business owner.

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