How to Launch a Business While Minimizing Risk with Moksh Popli
The old saying “no risk, no reward” applies to all aspects of life — including and especially business. However, the most successful entrepreneurs aren’t those who recklessly embrace risk. Rather, they shrewdly mitigate it. According to Moksh Popli, here four powerful, practical and proven ways to launch a business while minimizing risk:
Be ultra-realistic about your cash flow needs
A staggering number of new businesses end up eventually disappearing — due to unrealistic capital requirement assumptions; particularly in the areas of marketing, advertising and customer acquisition.
The lifeline of a business is cash flow. New business owners need to clearly understand how much cash they need, and they also need to identify all viable sources of funding that could include bank loans, investment financing, personal savings, and doing a round or two of friends and family financing.
Get proper insurance coverage for a home-based business
Many new small businesses owners opt to set up operations out of their home. Not only is this more affordable than renting office space, but it’s also more convenient. However, home-based business owners need to properly insure their own equipment against risks like theft, and damage caused by fire, flooding, and accidental breakage (e.g. dropping a laptop down the stairs). They also need to insure any customer equipment that is stored on their premises.
According to Moksh Popli, many people who service computers or fix equipment out of their home are shocked to discover that none of these assets are covered by their regular home insurance policy, and they are personally responsible for all losses in the event of theft or damage.
Insist on restrictive conditions when hiring employees and contractors
As their business grows, owners need to hire employees or contractors to help shoulder the load and drive growth. However, it is critical to ensure that any new hires are governed by appropriate restrictive conditions, such as non-disclosure agreements, non-compete agreements, and non-solicitation agreements.
It is a good idea to have any restrictive conditions crafted by a qualified lawyer. Otherwise, there is a possibility that if the need for enforcement arises, the courts may throw out some or all of the clauses because they are inapplicable or inadmissible.
Operate through a limited liability company or corporation
There are some benefits of operating through a sole proprietorship, such as the ability to co-mingle personal and business assets (e.g. partially using a home internet connection for business use), and the fact that businesses losses could potentially offset income (and therefore tax liability) generated from other sources. However, in terms of minimizing risk, operating through a limited liability company (LLC) or corporation is the wiser move, as it prevents business owners from being personally liable for business losses.
According to Moksh Popli, a benefit of operating through a corporate structure is that business owners can offer equity to investors or key employees. This can open up several sources of funding that are not available through a sole proprietorship, which by law must only have one owner. As soon as more than one owner is involved, the structure must change into a general partnership.
