How to set your stop-loss limit

“Zero Risk Start-up: The Ultimate Entrepreneur Guide to Mitigating Risks When Starting or Growing a Business” is dedicated to all the wantrepreneurs and intrapreneurs out there who want to learn how to start or scale their own businesses at no risk. The book raises many interesting questions and identifies many of the risks. It also offers some sensible advice.

Acceptable risk

Entrepreneurs often trip up on a very common problem: they haven’t considered what their acceptable risk level is. Set your stop-loss limit. It is important to understand that the stop-loss limit is reached not when there’s no more money in the bank account but when your liabilities reach the limit you’ve previously identified. I could not agree more. For that reason, the book is absolutely worthwhile. Calculate your ALTAR and ALRIR: the acceptable level of Tangible Asset Risk (ALTAR) and the Acceptable Level of Reputational and other Intangible Risks (ALRIR).

ALTAR

A: Identify all owned assets that you and your family can (and are willing to) put at risk that can become liquid assets, such as money/securities, within a one-month period.

J: Estimate how many months/years you’ll need to find a new job in case your business fails.