Thomas M. Bragg on Business Risk Management

My girlfriend Amy has a home-based, small business, working as a professional wedding and portrait photographer (one of the best in my very-biased opinion, but check out her site and judge for yourself.) I work with Amy as a PT photographer on weekends and also help her out on the business side of things. As I’ve learned the in’s and out’s of a home-based, single person business, I’ve been paying attention to its similarities and differences in terms of risk management.

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Amy’s small business has many of the risks faced by traditional brick and mortar businesses. She has equipment related risks. She has market related risks. There are the normal insurable risks. But Amy also faces some interesting risks that are unique to a home-based business. If school is canceled due to a snow storm, the kids are now around the “office” all day presenting a formidable distraction. There are always risks of getting diverted from the work activities to home chores. As the sole employee, Amy’s business grinds to a halt if she gets sick. There are also risks associated with the isolation that comes from being a sole proprietor.

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Amy’s business also has many of the same opportunities that are available to “traditional” businesses. Marketing, production efficiencies, technology, strategic partnerships, etc. all present areas that could be exploited for improved revenue or profitability. But a home-based business offers unique opportunities as well. There are lifestyle opportunities like being able to be there when the kids get home from school and having the ability to make instant adjustments to work/life balance (you know, like adjusting from 100/0 to 98/2). There are tax opportunities for home improvement related business expenses. Amy also has an opportunity to tap into a contingent workforce of small people that are willing to work in exchange for a only little extra computer time.

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Home-based businesses don’t have a free pass that exempts them from the need for risk management. In fact, I would argue that they have a more urgent need because each risk that becomes reality has a much larger relative impact on a sole proprietorship than it does on a larger business. (100% of a sole proprietor’s employees will be involved in dealing with a crisis, while only a portion of a larger business’ employees will probably be affected by a similar crisis.)

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I can already hear the chorus of sole proprietors: “We don’t have time to manage risks!”. I know you think you don’t. But I would suggest that every decision you make is driven by some type of risk or opportunity. I would also suggest that you are already managing risks, but call it something different – like running a business. The only difference I’m suggesting is take the time to jot down the potential risks as you think of them. Spend a little time thinking about which risks and opportunities would have the biggest impact on your life and then sketch out what you would do to exploit the opportunities and minimize the risks.

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Risk management does not need to be burdensome. The process can be scaled down – it just shouldn’t be scaled down to zero. Check out my other blog posts for step-by-step instructions. Here is a good place to start. Although most of my writing is written in terms of “traditional” businesses, you can apply the same principles to your home-based business.

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What type of assistance would be most helpful in getting you started, small business owner? Leave me a comment and let’s make it happen.

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p.s. Amy doesn’t know it yet, but a risk management plan is in her future