Alright, we always have to start with the fundamental question- What is risk?
Risk is the possibility that an event, positive or negative, impacting a project’s outcome could happen.
For most traditional projects, positive risk has only one response- accept.
Work got done faster than we thought? Cool, put that extra time into our schedule buffer and keep on chugging along. The vendor is willing to do it for cheaper than we budgeted for? Great, take that savings and put it in the management reserves and keep going.
When it comes to businesses, however, the positive risk of having too much work is less routine. Most entrepreneurs don’t worry about it early on, as the start-up effort to market the business can be daunting. Nor do a I personally give it much thought, because as a Project Manager, I set my own schedule. I am also big on the idea of doing what’s right for my customer, and if I don’t think I can take on the extra workload, I know plenty of other project managers who would be happy to take a referral. So far now, my risk mitigation for too much work is to transfer the risk to other consultants in my space.
As for the negative risk, well, that’s a long list.
- Whenever you’re talking money, there is always the risk of getting sued. It’s not high on my list before I have a client, but forming an Limited Liability Corporation (LLC) is definitely on my to-do list.
- There are also some positive risks that justify forming an LLC, including making enough money to contribute to a Uni-K or a Solo 401k. Tax write-offs are also good, but the deadline for capturing those benefits is the end of the calendar year, so I’m holding off until talking to a CPA to pull the trigger on this risk mitigation plan.
- Running out of money
- Step one was to consult with a financial planner and review my finances. This was the first recommendations I asked for when the idea to start my own business popped into my head. In the grand scheme of things, my start-up costs are affordable, so I accepted the financial risk of striking out on my own.
- I started with an emergency fund and relatively low living expenses, so my triggering event for this risk is when I eat through my emergency fund. At my current burn-rate, I estimate that I’ve got until the end of the summer, or Labor Day weekend, before I need to find alternative sources of income.
- Speaking of alternative sources of income, I do have investments, and I rent out my 2nd bedroom, so I do technically have a revenue stream… just not enough to cover all of my living expenses even for the first month. It’s a minor mitigation step, but hey, better than nothing!
- I recently got off the phone with a peer who told me that signing a client can take between 3-6 months, which increases the probability that I’ll hit my deadline before I have my first customer. On the other hand, I also met another peer who had just signed her second client 2 months into her endeavor to become an independent consultant, so I’m willing to accept the risk
- I still need to mitigate the risk, however, so I’m doing several things
- Paying more attention to how my investments are doing and rebalancing my portfolio according to my updated financial needs
- Cutting back on my expenses where possible without sacrificing the purchases that feedback into my business. For instance, I may refrain from going out in favor of paying a web developer to stand-up my website. (Those are not equivalent expenses, but the website is a depreciating asset for my business over the span of 7 years, while the entertainment is certainly not tax deductible)
- And finally, the ultimate fall-back plan to “I need money” is to keep an eye out on the job market for roles that fit my professional needs. If I see something that matches what I’m looking for in my next role, great, I’ll apply. If not, I just leave my profile on LinkedIn as “looking”, and focus on my business. Eventually, as my emergency fund shrinks and my deadline approaches, I’ll take a more dedicated approach to job hunting, but for now, I went into business for myself because I wanted to enjoy the creative problem-solving aspects of project management, and I won’t settle for less than that.
- Not enough leads
- This requires mitigation to the extreme. I’m a part of the Arizona chapter of Society for Information Managers (AZ SIM), so I’m putting a lot of weight into my professional network drumming up some traffic for me. I don’t expect any of my current contacts to become my customers, as they would have tapped me while I was in the industry if they had such a need, but it can’t hurt to let them know that I’m striking out on my own and looking for clients. At the very least, they’ll point me in the right direction.
- The website is currently more of a place to land than it is a way to attract organic leads, but in combination with the blog and case studies, I can post articles to LinkedIn that might garner some attention from my extended network. Similarly, I’ve stood up a Facebook page that I am gradually asking my friends to “like” so that I might start to look like a legitimate business.
- Failing my personal network from dumping leads into my lap, I’m bracing myself to sign-up for a Premium account on LinkedIn and do some “cold calling” via inMail. It’s not anyone’s favorite task, but it’s a definitive action I can take to increase my exposure. I’m saving this mitigation step to be “triggered” after the July AZ SIM chapter meeting.
- No clients
- Even assuming I acquire leads that allow me to pitch my services, a lead generally doesn’t convert into a client for various reasons. If, by mid-August, I don’t feel close to closing a client, regardless of how well I’ve managed my budget, I will have to revert back to our ultimate fall-back plan and put my nose to the job hunting grindstone.
It’s alright if this experiment falls through this year, I have every intention of it becoming a “fail forward” experience. I’ve accepted that risk.
Once the website is stood up, I can continue to contribute to the blog based on my professional adventures and build up a content base. Regardless of whether I go back to independent consulting later, this fulfills my personal desire to have a creative outlet for myself, both reflective of my professional life as well as my personal experiences. I’ll also have taken a summer’s worth of vacation that will recharge me as I wade back into the fray of the corporate world.
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