Risk Management
There are two kinds of risk: risk you can control, and risk you can't control. If you are an entrepreneur, you have voluntarily and with full knowledge, given up the certainty and security of a regular paycheck and accepted the reality that factors beyond your control will determine the future of your business, and your ability to sleep at night.
Control whatever you can...
If you have done a thorough and objective assessment of risk, legal and otherwise, you can manage risk handily. Keep your studio clean and in good repair. Correct conditions that can be corrected, like loose banisters and slick floors, and make certain you are adequately insured against conditions that can't be anticipated. Accidents happen, even under the most watchful eyes.
You can't control whether someone gets hurt, or who that someone is, but you can prepare for it by maintaining enough insurance, including personal liability coverage. In legal terms, the person who is injured and brings the lawsuit is called the plaintiff. How much money the plaintiff is awarded as compensation for the injury is the "recovery". If, as a result of the injury, the plaintiff can't work, the amount of her recovery depends upon how much money she lost by not being able to earn. You can do the arithmetic!
Injuries are not the only potential source of liability. Have your attorney review your waivers and redraft them to cover loss or damage to personal property, if necessary. Students "lose" their wallets, iPods, and cell phones all the time. Don't put yourself in the position of having to replace their stuff, because it's too small to insure. Have your students and faculty sign releases to allow you to use their images in your promotional literature or videos. Otherwise, you have no right to use them.
Freelancers need to maintain adequate health and disability insurance, even if their income is uneven and unpredictable. Look into associations and unions for the self-employed which may offer lower cost insurance and savings plans. Never work without a contract, and always have an expert review it. File tax returns, even if you think you didn't earn enough. Take advantage of low cost or free legal services that are available to artists. Rely on your best friend for moral support, not legal or financial advice. Except if your best friend is licensed and practicing.
Don't be too shy or think you're too poor to consult your lawyer about employment relationships, copyright infringement, landlord-tenant and real estate issues, and agreements for the purchase of goods. These are all areas of potential liability that you can control.
and deal with what you can't.
You may have embraced the freedom of self-employment with enthusiasm; or chronic unemployment may have left you without much choice. Under the best of circumstances, being self-employed or relying on your own business for your livelihood means living with uncertainty. And whether you are temperamentally suited to deal with uncertainty may be irrelevant.
The business school experts tell you to make sure you're adequately capitalized (that is, have some money in the bank), to develop a business plan, to make projections. The advice sounds very professional, but it's not always possible, especially when self-employment is the only alternative to unemployment.
Here are some basic and obvious tips without going for an MBA: Don't start a business, and definitely don't quit a secure job, without some commitment from potential clients or customers. Line up some backing, even if it's your dad. Think creatively in terms of minimizing your overhead, and organize your personal finances so that you can channel your income back into the business instead of the credit card companies. Speak to your bank about earning interest on your business operating account, and your accountant about deducting interest you pay on business charge accounts. Look into the availability of lines of credit to create a healthy business history and, incidentally, to carry you over the lean times. Find a partner to share the risk, the headaches, and the rewards. And focus on the rewards, not the risk.