Franchise Talk

Franchise Companies Should Understand Risk Management To Be Successful

March 30th, 2009 | Author: Jack

Risks. We all take hem throughout our lives starting with asking someone out on a date, buying a first home, moving to a new city or launching a business. Most of the risks one takes during his life will be taken on his own. So it should be with personal risk one is most familiar.

Risk-sharing is not a new concept at all. Early in my career I worked in the San Francisco Bay area. The Chinese community there helped each other get into business through an interesting concept that was known by outsiders as the “Chinese Banking System.” Basically, neighborhood businessmen would meet and any of them could present a budding entrepreneur that they were willing to sponsor.

The young entrepreneur would make the presentation to the group and the sponsor would let everyone know how much of the investment he was willing to make in the new business. Other people in the room would then make an offer to invest. The investment was guaranteed first by the entrepreneur, and secondarily by the sponsor. The point is that the owners of existing businesses saw the value proposition in assisting others in starting businesses. That meant there were more people to do business with and those who became successful could join the investment group and offer assistance to future entrepreneurs.

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