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How Entrepreneurs can control business risks

21 Aug, 2019 / MVS Mani

The founder of India’s largest coffee chain Cafe Coffee Day, VG Siddhartha, caused a lot of turmoil in the country when he went missing. When the nation subsequently got to know about his decision to end his life, it came as a big shock to many entrepreneurs. What made it even more confusing was the fact that Siddhartha was a leading Entrepreneur who had a solid background. His failure baffled everyone and left them perplexed.

When it is a business, there is bound to be certain slip-ups even when we are extremely wary. In fact, it’s not anybody’s fault. Entrepreneurship certainly has its ups and downs. Nevertheless, this incident got me thinking and I wanted to list down a few crucial points that we must take care of as entrepreneurs. If we are mindful of these downs from the very beginning, we can try and avoid them and this can even help us save money, time and effort. I hope they will be of help to the young entrepreneurs of today.

  • Steady Business model

Any business model should be continually tested in order to ensure stability. A business model influences an organisation’s competences and constraints the viability of strategies through its effect on the organization design.  Market testing is also a step that cannot be avoided. One must also understand the pitfalls of the business and apply appropriate course correction on time to ensure longevity.

  • Source of Money

One must always be careful and pay much heed on whom the money is being raised from. Right investors and smart money is crucial in investment. It is important for the investors to understand the business model and the risks as well.

  • Government Compliance

This should be of top priority. If you do not fulfil government requirements, you will not be able to take advantages of the benefits and it could result in a lot of trouble in future. Stay in compliance always.

  • Do not throw good money after bad

Any economics student can tell you this. This means that rational agents mustn’t take irrecoverable costs into account when deciding on investments. When you have multiple investment interests make sure you don’t blindly keep investing good money after bad money.

  • Keep personal and business assets separate

Never link personal assets with business assets. When you build your business, ensure that you build your personal assets, however, keep both separate. If there’s no other way, limit it to a bare minimum.

  • Make it a habit to save and invest

All throughout your career, you must plan for savings and investments. You can start by saving 10% of your earning early in your career and go up to 50 percent in later stages when you start earning more. Along with saving, investments are also something that you need to be doing consistently.

  • Spread your investments

While investing is a good habit, ensure that you spread your investment. This can be done by having 50 % of your investment in a low risk portfolio. This means that no matter how the economy changes, 50% of your investment is completely safe.

  • The loan rule

Never take loan for more than 3 years of your earning. This is a golden rule and might seem difficult to follow, however, if you think about it, this will help you sleep better at night because no matter what happens in the future, it will take you only a limited time to pay off your loans.

  • Be prepared to restart

Nothing is permanent. Never assume that nothing will ever go wrong. Be aware of the risks and always be prepared to restart your journey.

I hope the above tips will help you. In the end, the exact reason why VG Siddhartha decided to end his life and what he must have thought about in those final moments of his life may never be crystal clear. In fact, though we have the purported email that points us towards a particular direction of thought, we can never be a hundred percent sure of his reasons. By following some basic rules, young entrepreneurs can ensure a better business life.

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