Wearing the Parachute

Jumping into a new business with both feet may be too risky for some people. In fact, most people believe it is best to stick one toe in to test the waters first, and most new businesses start on a part-time basis, while the owner is still working elsewhere.

Work Smart Remember that there is always a risk-reward tradeoff. Usually, when you reduce your new business risk, you also reduce the potential reward of your new business. For example, the new business may not generate as much income for you as you had expected.

To find out ways to reduce your risk and to learn what to do when a business isn't a success, consider the following:

• Family-operated businesses make a lot of sense in certain instances. You must always look at more than just the dollar decisions when involving your family.
• Franchising is a way to increase visibility and reduce the failure rate of your new business.
• Hiring a manager may enable you to keep your current job. But this alternative is only as good as the manager that you hire.
• Home offices reduce the risks of many new businesses. The home office alternative will keep your startup and shutdown costs lower.
• Part-time operations will usually make only part-time profits. But the part-time operation can be the answer in certain situations.
• Know when to cut your losses. You need to come up with some type of cap on how much you're willing to spend to make your dream a reality.