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.
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.
