.Starting a business entails a huge financial risk. It can go other way: succeed or fail. Thus, it is important to determine what can you lose and how much you are prepared to risk for your new business.
CNBC’s personal finance correspondent Sharon Epperson, author of “The Big Payoff,” gives this important advice in her article “Starting a business? Tips for a successful launch”
How much money you can afford to lose? If you put $20,000 of your savings toward your business, are you prepared to lose it if the business isn’t successful? Will you still be able to cover your personal expenses and meet other financial goals? “You may be excited about your idea, but you need to be practical,” says Judith Rosenthal, a financial advisor with Ameriprise in New York. “The risk should be in line with your financial situation. If you lose $50,000 or more in savings, will you still be able to pay your mortgage and other household bills and also save for your retirement and kids’ college education?” Don’t lose sight of your other financial goals.