Can you take the risk of starting a business? I think most of the focus in starting a business is about the specific risk in the business, but Eric Williams notes a problem with what he calls general entrepreneurial risk on the Oregon Business Broker’s Info for Business Buyers.
Writing specifically about business buyers (as opposed to business starters, generally a different group), he says:
I find that some prospective buyers obsess about and over-analyze General Entrepreneurial Risk, rather than Specific Business Risk.
What’s the difference?
- Employee turnover is general risk, but dependence on two very important employees is specific risk.
- Losing clients is general risk, but a business that depends on one client for most of its business has specific risk.
What I realized, reading Eric’s post, is that I normally look at a business plan with an eye on the specific risk. But in starting of a business, buying a business, or running a business, you also have to acknowledge the general risk out there. Including the rest of Eric’s list:
- uneven cash flow
- a declining economy
- an important vendor going under and
- many others.
If you’re going to start or grow a business, you live with a lot of risk. And remember, by the way, that risk goes both ways: There’s a lot more upside to owning your own rather than just being an employee, but more downside, too.