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Wyoming Business Tips for May 11-May 16

May 2, 2014

 A weekly look at Wyoming business questions from the Wyoming Small Business Development Center (WSBDC), part of WyomingEntrepreneur.Biz, a collection of business assistance programs at the University of Wyoming.

By James Drever, WSBDC regional director

“I am working on a business plan and am wondering about risk management. How I should plan?” Kim, Laramie

In your business plan, you want to plan how to protect yourself and your business from risk.

First, you want to understand what are your risks. There are basically three categories to examine:

-- What are your property risks? Think of buildings, vehicles and equipment.

-- What are your liability risks? In this case, product liability, obligations to customers visiting your business or a problem with a professional service you are providing are common examples.

-- Finally, what are your perils, such as theft, fire and flood?

Once you have figured out what risks your business faces, work on how to deal with them. There are generally three ways to handle risks:

Risk transfer -- This is for high-severity, infrequent events. Insurance is a common way to mitigate risk, but think about leasing a building instead of buying. Also, think of business interruption -- can you manage this, or should you insure against it? If your business has to close for three months, do you have other income or a rainy-day fund to keep you afloat? If you do seek business interruption insurance --also called business income insurance -- it is more affordable if you have been in business for a while.

Retain the risk -- In this case, you accept the risk as part of doing business, mostly for less severe risks, which are both common and expensive to insure against -- shoplifting is an example -- or playing the odds against that risk. In this risk retention, there are two ways risks are retained: passive retention and active retention. Passive retention is when you just play the odds it won’t happen. Active retention, for example, is when you set money aside for an event. This could be factoring loss and damage to inventory into your pricing scheme.

Controlling the risk -- You may just avoid the risk altogether, or you can reduce the risk (training, fire extinguishers, certification, etc.).

There will always be risks, and you will discover new ones all the time. Planning on how to manage those risks so that you can make them less likely to happen, or survive them when they do happen, ensures that your business will be better and stronger because of it.

We have added much of this information to our business plan template, available along with other great business information, on our website at

A blog version of this article and an opportunity to post comments is available at

The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question, call 1-800-348-5194, email or write 1000 E. University Ave., Dept. 3922, Laramie, WY, 82071-3922.

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