Six Low-Risk Ways to Start a Business

9.11.13 Starting a Business


Story provided via All Business


Summary: While it’s impossible to avoid all risk when starting a business, careful planning can help get businesses up and running with a minimal amount of risk. These six strategies can help reduce your exposure while at the same time saving you money and headaches during your business’s early stages.


Every business startup involves some degree of risk. But while no business is risk-free, some ways of launching your business are less risky than others. Here are six low-risk ways to start a business:


1. Start your business from home: Choosing a business location requires you to lock yourself into a lease and pay rent, utilities, and other costs for the space. But many types of businesses can just as easily be operated from home. By running your business from home, you not only save the overhead costs of commercial space, but you also save the time and money you would normally spend commuting, which can boost productivity. (For more information, see Planning for a Home-Based Business.)

2. Start your business part time: If your schedule allows, you can start a business while keeping your full-time day job. This gives you the cushion of a regular paycheck and benefits from your job until your business is making enough to support you. If running a business and working full time is too much, consider getting a part-time job to pay the bills while you launch your business. Look for part-time work that has flexible hours to give you time for your business. You can even turn it into a business education; for instance, if you’re starting your own fashion-design company, get a part-time job at a boutique so you can learn the industry from the customer’s point of view.

3. Start an e-commerce business: These days, a retail business doesn’t need a bricks-and-mortar location to succeed. By selling your products online, you can reach a nationwide or even global customer base. You significantly cut your costs, since you aren’t paying rent on a storefront and don’t need to hire salespeople. Depending on how much business you get, it’s possible to run an e-commerce business all by yourself, at least when you first start out. You can also launch an e-commerce site as a way of testing the waters and then expand to a brick-and-mortar location once your sales start to take off. (For more information, see Plan a Business Website That Works.)

4. Buy an existing business: If the costs and risks of starting a business from scratch intimidate you, consider buying an existing business. Although investing significant amounts of money up front can be risky, that’s mitigated by the fact that you will be buying a business where the location, employees, customer base, and systems are already established. Since you won’t have to go through the trial-and-error you would with a brand-new business, you’ll save time, effort, and money.

You’ll want a business that has proven itself successful and stands a good chance of thriving under new ownership. Enlist a business broker to help you find the right one and have your attorney and accountant help you with the due diligence. If you do your homework, you’ll be buying a known quantity and greatly decreasing your risk of failure. (For more information, see Options for Buying a Business.)

5. Buy a franchise: In a franchise you pay the franchise company (also called the franchisor) a fee, and ongoing royalties in exchange for the right to do business under the franchisor’s name using its business procedures. As a franchisee, you’re paying for a proven system of doing business.

Just as with buying a business, you need to do thorough research into the company you’re considering. Do it well, and you should end up with a franchise that trains you how to run the business, assists in finding a location and opening your business, provides marketing and advertising support, and offers advice and help on an ongoing basis. Franchising is often described as “being in business for yourself, but not by yourself,” because having the franchisor to back you up greatly lessens your risk. (For more information, see A Consumer Guide to Buying a Franchise.)

6. Don’t hire employees: No, we’re not suggesting you do all the work yourself. But hiring salaried employees adds greatly to your risk. First, there’s the ongoing cost of regular salaries as well as payroll taxes and the cost of any benefits. You’ll spend time and money staying on top of federal and state employee laws (or hiring someone to do so). In addition, employees open up liability risks, such as your need to get workers’ compensation insurance or the risk of being sued by a disgruntled staffer.

No wonder many entrepreneurs find independent contractors or freelancers a smarter way to go. There are no salaries, benefits, or insurance issues to consider. Thanks to technology it’s easier than ever to work collaboratively with a team of independent contractors without being in the same office. In addition to cost savings, contractors offer flexibility because you can hire them on a per-project basis. Be sure to stay on the right side of the Internal Revenue Service when hiring independent contractors; find out more at the IRS website.


Business Takeaways:


  1. You can reduce startup risk by investing in an established concept and buying an existing business or franchise.
  2. Starting your business part time, from home, or online allows you to avoid overhead costs and offers flexibility while you test your concept.
  3. Doing without full-time employees in the beginning saves you money and reduces insurance and legal risks.

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