Entrepreneurs are known for taking risks, but as their companies grow, the concept of “de-risking” becomes more prominent. De-risking involves reducing the risk in a business by diversifying revenue streams and reducing dependence on a single client. This approach can make a company more attractive to potential buyers or investors. One way to de-risk a business is to start small and gradually expand by solving problems for larger companies.
The least risky path to building a high-value company involves three steps. First, start a small business that addresses a problem faced by large companies. For example, Evren Ozkaya started a consulting firm, Supply Chain Wizard, to serve the pharmaceutical industry after a new law required increased transparency and data management. By helping larger companies meet this new requirement, small businesses can secure clients and establish themselves in the market.
Second, target the U.S. Federal Government as a client. Government agencies are reliable payers and can help de-risk a business by providing stable revenue streams. Companies like Kitewire, which served government agencies like the FBI and U.S. Navy, found success by leveraging government contracts to build value. Additionally, the government offers resources and funding through programs like Small Business Innovation Research, opening up opportunities for small businesses to grow and develop.
Finally, utilize non-dilutive funding sources to build value. Companies like VRC Metal Systems and Warrior Centric Health have leveraged grants and loans from the government to develop their businesses without giving up equity. This approach allows entrepreneurs to retain control over their companies while accessing capital to support growth and innovation. By building small businesses around solving problems for larger industries and leveraging government resources, entrepreneurs can de-risk their companies and set themselves up for success.
By focusing on de-risked growth strategies and building valuable businesses in regulated industries, entrepreneurs can create sustainable growth and attract investors. The stories of successful entrepreneurs who have followed this approach serve as examples of how de-risking can lead to long-term success. While traditional risk-taking may be celebrated in the entrepreneurial community, de-risking offers a strategic alternative that can lead to riches in a more sustainable and stable manner.Entrepreneurs are known for taking risks, but as their companies grow, the concept of “de-risking” becomes more prominent. De-risking involves reducing the risk in a business by diversifying revenue streams and reducing dependence on a single client. This approach can make a company more attractive to potential buyers or investors. One way to de-risk a business is to start small and gradually expand by solving problems for larger companies.
