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How To Minimize Investment Risk -- And Bounce Back If Your Deal Falls Through

Forbes Finance Council
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For some businesses, a pending investment deal brings the promise of a much-needed cash flow injection. Unfortunately, business deals fall through all the time, and there's a possibility that yours could meet the same fate.

A lost opportunity like this can be a big financial blow to your company. It may mean cutting costs and making some difficult decisions, but it doesn't have to be the end of your business. In fact, it could give you the opportunity to rebuild and come back stronger than ever.

The experts from Forbes Finance Council suggested nine ways to come back from tough financial times, including some preventative measures to make sure you're prepared for the future.

All photos courtesy of individual members.

1. Have A Wide Margin Of Safety 

Prevention is the best cure. Make sure you have a wide margin of safety in terms of spare cash, available credit lines, sticky clients, and so on. In times of trouble, you can draw on the emergency net you have built to help stabilize the situation. The next step is taking a step back and reassessing: You should understand exactly what went wrong and formulate and communicate a strong reaction plan. - Gabriele Grego, Quintessential Capital

2. Diversify Your Investments To Spread Out Your Risk 

Hopefully, the business owner has other investments that can help to recoup the loss of the larger one -- or at least stop the bleeding. One way to watch this is to never invest more than 10% of your investment funds into any one specific deal. If your risk is spread out, taking that one loss won’t ruin you. Being able to stay above water long enough during tough times generally does the trick. - Jared Weitz, United Capital Source Inc.

3. Be As Transparent As Possible With Your Team 

Your employees typically already know when a big investment deal is in play or when the company is experiencing tough financial times. Be as open as you can, and roll up your sleeves and engage them. Explain what has happened and what you learned as a leader, and lead by example. Show them what you are doing to cut costs, and ask them to join your efforts. - Robin Campana, Bulldog Solutions

4. Lead By Example 

Show everyone you're serious about making things work. Be the first to take a pay cut, give up benefits and work harder. It's your business, so enjoy when times are good and give back when times aren't. Doing this will drive employee morale and support, and good employees will help you get through just about anything. - Chris Tierney, Moore Colson CPAs and Advisors

5. If Your Risk Management Strategies Failed, Go Back To The Beginning 

First, implement risk management strategies to prevent a big deal from going belly-up to begin with. However, if life happens, go back to the beginning. Make cuts and reduce expenses. Doing so allows you to start rebuilding your business and establishing a stronger company. You can achieve the long-term vision for your business. - Justin Goodbread, Heritage Investors

6. Implement A Savings Strategy So You Can Go Right Back To Business As Usual 

A one-deal business isn't a sustainable business. To prepare yourself for a big deal, you will need to save for it in three ways: Save to prepare for the distraction from your flow business, save for onboarding your big deal, and save revenue from the big deal once it is won. Doing these three things can allow you to move back to business as usual seamlessly if you lose the deal. - Scott Karstens, NFG Brokerage

7. Be Prepared To Make Hard Choices 

Investment deals should not be considered a "done deal" until the cash hits the bank. If your business's survival depends on a deal, you are already going down the wrong path. Tough financial times can hit anyone, and it will lead to making some hard choices (like laying off employees), but it can also be a time of great opportunity to reassess and pivot your business for success. - Vlad Rusz, Vlad Corp. USA

8. Plan For Two Consecutive Financial Blows 

As the saying goes, the key to staying in business is to stay in business. One way to stay in business is to plan for not one but two consecutive major blows. By adopting this mindset formally and including it when you're planning your budget, growth plans, and financing, you might be able to avoid getting swept up and still be able to invest and grow sustainably. - Atish Davda, EquityZen

9. Don't Count On The Deal 

It's essential to have a plan in place to get you through a rough patch in your business  especially when it comes to preserving cash in lean times. Your plan should incorporate working with vendors to stretch terms, reducing controllable costs and identifying surprises before they happen. Your new investment builds new paths for your business to grow, not just to fill potholes. - Scott Margolin, AcceleratingCFO

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?