1. Prepare: The best way to mitigate risk is to be prepared. Understand the difference between good and bad risks. Do not take unnecessary or undue risk. A good risk is one that falls in your area of expertise and offers a significant reward at the end that greatly outweighs the consequences of failure. A bad risk is one that falls outside your area of expertise and offers a minimal reward at the end that does not measure up to the consequences of failure. To be prepared to take risks, good ones, you must thoroughly understand the subject matter. It is like preparing for a test. If you listen in class, do the homework assignments, and read the assigned books, the odds are in your favor that you will pass. The same is true of preparing for risks. Perform a risk assessment. Do your research and homework and understand what you are getting yourself into. Make a list of the consequences and potential losses involved of taking the risk. On the one hand, list all the potential consequences associated with failure, on the other hand list all the potential consequences associated with success. Take an accounting and judge if the risk is worth the reward. However, be advised that by the very nature of risk, no amount of preparation can ensure success, you can only hope to maximize the gain or minimize the loss. You can also turn a bad risk into a good one through preparation. In my case, I have experienced both sides of the preparation equation. I have recollections of where I too often entered a classroom unprepared for a test and suffered the consequences early in my academic career. I also have memories of entering a client meeting well prepared with confidence, fully expecting to get the project or contract. Preparation truly is the best way to mitigate risk.

2. Accumulate assets: The second-best way to mitigate risk is to limit your exposure to risk. As most of the risks associated with entrepreneurship involve exposure to financial losses, you should prepare yourself by fortifying your tolerance to loss. You can do this by accumulating assets and distributing them accordingly based on your risk assessment. There are two types of assets, liquid and fixed. Liquid assets are cash or those assets that are easily and readily converted into cash. Fixed assets are long-term investments that are not readily converted into cash. You will want to assess your liquid assets and possibly liquidate some of your fixed assets in preparation for your upcoming exposure. In my case, an accumulation of assets became a lifeline for me in one of the toughest financial stretches of my career. I was burdened with a series of unfortunate events that made meeting my financial obligations nearly impossible. If it were not for that accumulation of assets, which I was able to liquidate and use as a lifeline, I fear bankruptcy and foreclosure may have been inevitable. I started this story back in Chapter 3 regarding the riskiest financial decision of my career. I had taken a huge risk, planned well, but was struck by unexpected hurdles and setbacks. It involved a risky purchase of a high-priced condominium unit that needed a total remodel. It was to be the purchase of our dream home. The problem was that it was being sold at auction, and only cash buyers could bid. We did not have that kind of cash, so I sought out a short-term hard money lender to provide the cash and remodel funds. The purchase would have to be done through a limited liability company that I owned so that the hard money lender could foreclose and take title of the property if I could not repay the short-term loan. That is the only way they would lend me the money. My plan was to purchase the property using the cash from the hard money loan and remodel it, then transfer title via a quit claim deed from my limited liability company to my name to then be able to secure a conventional mortgage and repay the hard money lender after the remodel was complete. It was a good plan, but the process quickly veered away from the plan. I secured the hard money loan, won the bid, but not after a competing bidder drove the price of the property higher than I had planned to pay. That was the first hurdle. The second and third hurdles occurred upon appraisal, when the property, in its existing condition, did not appraise to the satisfaction of the hard money lender, which then subsequently reduced the amount of remodel funding that I had originally requested and been approved for, contingent on appraisal, of course. Therefore, I had to find another source of funding to complete the remodel. Due to the low appraisal and reduced remodel funds made available to me, I ended up maxing out our credit cards to complete the remodel. A series of construction cost overruns and permit delays became the fourth and fifth hurdles, which stretched the hard money loan terms to its limit and further strained our credit limits and cash flow. This was the sixth hurdle I had not counted on. If we could not finish the remodel and close out the permit, the bank would not lend us the money to repay the hard money loan, and we would default and risk losing the property. Having strained every inch of available credit and using up all of our available cash, we managed to complete the remodel, quit claim deed the property to our names, secure a conventional loan, and repay the hard money lender. However, not without encountering further problems and hurdles. Once again, the completed property did not appraise as expected, and the bank refused our request for an equity line of credit that would have allowed us to pay off our credit card debt, which we had incurred to complete the remodel. That became the seventh hurdle. We were now saddled with maxed-out credits cards at extremely high interest rates, but we were still within our means to repay. That is when the eighth and costliest hurdle reared its ugly head. Our taxes, due to the major upgrade in the condition and value of the property, tripled, but the bank did not account for that increase and grossly underestimated our escrow payments, and we now had a significant shortage in our escrow reserve, which immediately caused our mortgage payments to double to make up for the escrow shortage. We now found ourselves unable to meet all our financial obligations, and we let our credit card payments slip so that we could meet our mortgage obligation. To add insult to injury, three months after we closed on our newly remodeled unit, we encountered our ninth and tenth hurdles when we were struck hard by hurricane IRMA, which caused significant water damage to our newly remodeled unit. The insurance company initially offered us a total of approximately 900 U.S. dollars to repair the damage. We had to sue the insurance company and had to litigate it for over one year, to get a fair settlement. As it turned out, we had accumulated assets for such an eventuality. We had numerous investment properties that we owned, and it was not my plan to do so, but we managed to liquidated three of them and used the cash to pay off most of our debt to relieve ourselves from the financial hardship we were facing. My original plan was to secure a hard money loan, including funds to complete a total remodel, purchase the property with cash at auction, remodel the unit, quit claim the unit to our names, and secure a conventional loan with an additional equity line of credit, which we would use to pay off the remodel costs. I had done my homework. I had a planned it out. I understood the risks involved. I had accounted for them, or so I thought. I was accustomed to the sacrifices involved once the plan went south, my wife, not so much. However, because I had accumulated those assets, lowered our liabilities, and planned for the risks, we were able to overcome. We persevered. We now live in that beautiful unit, to this day, and cherish every minute of our time in it for its exquisite views and the peace that it brings us. The moral of this story is that if I had not had an accumulation of assets as mitigation for this very situation, I may not have been writing this book from my new condo unit with a great view. Because of that mitigation strategy, we now we find ourselves in a good financial situation once again.

3. Reduce liabilities: Another way to limit your exposure to losses is to reduce your liabilities and expenses. Review your budget. Cut down on all unnecessary expenses while you undertake the risk. Build yourself a financial cushion or safety net. In my case, prior to any potentially life-altering event (purchase of a home, change in jobs, launching my company), I always made sure to review our expenses and reduce them to the bare essentials to help mitigate any unforeseen financial situations. This was especially true in the prior example, and most recently, during the global pandemic COVID-19 that affected the entire world. I was able to understand and anticipate the need for us to tighten belts and reduce expenses and prepare for most eventualities to give ourselves the best chance to succeed and survive. I go into more detail on how preparation, accumulation of assets, and reducing liabilities helped us through the global pandemic COVID-19 in Chapter 11.

1. Be open with your family and loved ones: Taking a risk does not only involve exposure to financial loss; it also could involve exposure to mental or reputational injury. The risks involved with entrepreneurship, whether they be exposure to financial loss or exposure to mental or reputational injury, are not borne by you alone. They are carried by your family and loved ones as well. Talk openly about the upcoming risks and how you have planned for them. Discuss the sacrifices you will be expected to make. Being open about the hardships and struggles you can face, or are facing, is one way to lessen the emotional burden. Do not hide those feelings from your family or loved ones. In my case, I learned this lesson a bit later in the game, and my hope is that an aspiring entrepreneur will take heed of this advice. Refer to Chapter 8, the piece on the perspective of the significant other of an entrepreneur for more helpful advice on the topic.

2. Create an advisory group: Entrepreneurs understand that they do not know everything, so they surround themselves with advisors in all fields of practice to consult and seek advice from. This will help mitigate potential risk by filling in the knowledge gaps that could lead to mistakes. Entrepreneurs know that they cannot go at it alone, and that they need help from professionals, who are well versed in the areas they lack knowledge in, to keep them out of trouble, especially in the fields of law and accounting and taxation. Risk does not just include exposure to financial losses or mental injury or stress, but it also could include injury to your reputation. Having a group of knowledgeable advisors can help mitigate potential injury to mental health and reputation. In my case, I always made it a point to pick the brains of all my professional advisors and not just take their advice without first knowing why. I would then practice due diligence and read up on the topics to gain a better understanding.

3. Create a support group: Risks cause stress, and stress causes anxiety, and that can lead to mental injury. You should not underestimate the power of stress and the effects it can have on your well-being. Like with any other potentiality, you need to be prepared to handle the stress associated with being a business owner and responsible for the financial well-being not only of yourself but of your employees and staff. Do not be afraid to ask for help. You should identify people who you can talk to, preferably someone who has faced what you are facing. In my case, part of the reason I wrote this book is that I found few available resources regarding the struggles of entrepreneurship, what that entailed, and how to overcome them, so my hope is to mitigate that for the reader by providing this book as a reference and resource.

1. List all the fears you have and your reasons for avoiding them.

2. Write down the potential injury or loss.

3. Write down the potential benefits.

4. Make a risk assessment by comparing the potential injury or loss versus the potential benefit and decide if it is a good risk to take.

5. Make a list of ways to mitigate each of the risks and potential injuries and form a mitigation strategy for the future for each.