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Home › Topics › Starting a Life Science Business › Financial Skills, Planning, & Investors

Tackling Financial Risk

Topics Starting a Life Science Business Financial Skills, Planning, & Investors Tackling Financial Risk

An aversion to financial risk may get in the way of starting a business. To address any aversion you may have, it helps to. . .

  1. Understand the risks and prepare for them as much as possible (FFC, 2020, 2021).
  2. Learn about the potential sources of funding, including creative sources.

Know Your Business Well

  • Understand your time, quality, and money limits.
  • Know your business’s potential weaknesses in advance (FFC, 2020, 2021).

Be sure to understand your financial inputs and outputs and the essential components of your business that have the potential to change in unanticipated ways, including the following:

  1. Costs of raw materials, salaries, rent, equipment, leases, etc.
  2. Income from sales projections due to changes in the market, production delays, competitors, regulatory issues, delayed payments, workflow problems, vendors’ business problems, or reimbursement issues.
  3. Suppliers and alternatives if there are insufficient supplies of raw materials.
  4. Staffing—in terms of employee numbers and skills.
  5. Scalability of your product or service to successfully meet demand.

(FFC, 2020, 2021)

Understand Funding Options

To be prepared for financial shortfall, identify and become familiar with potential sources of funding and creative sources ahead of time (FFC, 2020, 2021). Understand basic types of secondary funding options (e.g., angel investing, venture capital, seed money), the investors’ motivations for each investing type, and resources. Being able to show that you are prepared to manage risk and that your risk is low is important to potential investors. See more information under the topic Early Funding.

Tips

  • Seek advice and learn about your options before acting financially, especially if this is not an area of expertise for you.
  • Stay “lean” in the early years. Avoid funding via debt.
  • Set up credit before you need it.
  • Keep your personal funds separate, and be sure to pay yourself.
    (FFC, 2020, 2021)

References

Forbes Financial Council, Expert Panel®. 16 Ways Small Businesses Can Tackle Financial Risk Management. Forbes: Money. July 23, 2020.

Forbes Finance Council, Expert Panel®. Council Post: 15 Expert Tips To Help Small-Business Owners Better Manage Financial Risk. Forbes: Money. July 23, 2021.

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Topic Home Expand All
Intro to Starting a Life Science Business
3 Articles
Overview of Starting a Life Sciences Business
Evaluate Your Business Skills
Finding a Sound Business Idea
Early Market Research
3 Articles
Case Example: Leslie Bowen, Early Market Research
Market Research Before Starting a Business
Tips for Biomedical Market Research
Business Planning & Commercialization
9 Articles
Writing a Business Plan
Develop a Reimbursement Strategy
Technical and Business Assistance and Other Commercialization Support
Case Example: Commercialization Advice
Other Post-SBIR Commercialization Support
Planning Your Research Environment
Technology Readiness Level
Design, Prototype, Testing, Manufacturing
Tips on Planning from Successful Biotech Entrepreneurs
Financial Skills, Planning, & Investors
6 Articles
Financial Planning
Tackling Financial Risk
Equity and Shares
Sources of Capital for Small Businesses
Case Example: Learning Investor Basics
Entrepreneur Financial Skills and Resources
Registering Your Business
3 Articles
Business Name, Tax IDs, and Insurance
Registrations for Your Business
Industry-Specific Requirements, Licenses, and Permits
Your Business Governance
4 Articles
Select a Business Structure
Cofounders, Partners, and Founding Team
Board of Directors
Roles You Can Play in the Business
Return to Starting a Life Science Business
End Resources

This project is funded by National Institute of General Medical Sciences (Grants 1R43 GM131458-01 & 2R GM131458-02)


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