Entrepreneurship is All About (Active) Risk Management

For those interested in starting a business or the general public, the idea of entrepreneurship and the day-to-day realities of owning a business are two vastly different things. A bachelor of business management can help to prepare you for this challenge.

In my first venture, a web-based financial tech startup, our team raised $250,000. Our startup was built to educate and assist investors with the develop of asset management strategies in order to self-manage their own capital in various financial markets.

Our business and revenue model was strong.

The company had several key revenue streams, and after nine months of pre-launch development and another nine months of post-launch operations, the company finally began to make money. Then six months later the company largely broke even.

Finally, 24 months later the company began to make enough money to make the venture worthwhile.

The Most Important Startup Lessons I Learned

Through the life of our company, our team learned a myriad of lessons, but one particular lesson has stuck with me above most.

A successful entrepreneur is characterized by many attributes, but an essential element of successful entrepreneurship is the ability to manage risk. Most people never even consider this aspect of business, but the ability to actively manage risk is oftentimes the difference between entrepreneurs who have a great idea and entrepreneurs who actually build successful companies.

The Greatest Startup Risk of All

The absolute, single greatest risk for any entrepreneur is the risk of running out of cash.

By definition, a business fails when it runs out of cash, or available credit. If a business spends more than it makes per month, then that burn rate will eventually cause the business to fail once all cash is spent and available credit is used up.

Therefore, every entrepreneur should be relentlessly concentrated and fixated on controlling costs and managing this risk.

Let’s discuss two key points that will empower entrepreneurs to successfully manage the risk of cash flow.

1. Cut Out The Non-Necessities

When you start a business it can be tempting to spend money on non-essentials, such as nice office space, beautiful office furniture, expensive computers, administrative staff, etc. However, this is a black hole of lost cash.