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How To Manage Business Risk



There are three elements to managing risk: risk perception, risk assessment, and risk management.  Last week we talked about risk perception, and how there are some really positive attributes and effects of allowing risk into your small business.  But today we’re going to focus on how to assess and manage risk, so that you minimize the negative outcomes to you and your art business, and enhance the positive outcomes.

Before we start, we need to divide risks into categories.  Pure risks are things that are always bad if they happen.  By that I mean things like burglary, fire, etc... always going to be negative. You don’t know if these things will ever happen, and you certainly don’t know when.  So how can you manage these sorts of risks?  Well you can take precautions on your own. Don't allow smoking where you store the fireworks, or run the shredder while wearing a tie. And of course you purchase Insurance, invest in alarm systems, and have legal representation on retainer. As an artist, you may think that there’s little risk that someone is going to fall and injure themselves in your studio.  And that may be true, though your landlord may require coverage all the same. But as photographers, we know that lights on tripods can be very unstable, so we carry liability insurance just in case.  I remember we were working on a real estate shoot for a new home when Bogdan’s tripod fell, and the lens of the camera took a visible chunk out of the newly painted drywall.  What are the chances that could happen?  And it wasn’t only the fear of damaging the customer's property, because we also knew that we need a working lens to do our job. You can’t be a photographer without a camera.  We have insurance coverage for those eventualities, because one seemingly small accident could cost us everything we own, or stop our business in its tracks.

Speculative risks are things that could be bad, could be good, or could bring about no change at all.  These are risks like playing the slots in Vegas, buying a lotto ticket, investing in the stock market, launching a new product or service, opening a studio, or signing with an art gallery.  In these cases, we simply don't know what the outcome will be. All we can do is research as best we can, weigh the risk against the price, and bet against the gradients of risk throughout the process or relationship.   I buy a lotto ticket because I can stand to lose a buck or two against the astronomical odds. I cannot however risk breaking my camera on a photo shoot... so we always have a back up camera at events.

It’s so important not to catastrophize when evaluating risk.  I know I could trip on the rug I have in the upstairs hallway at home.  I’ve never tripped before, but I catch my foot on the corner regularly.  If I were to slip, I could fall over the railing and drop to my death at the bottom of the stairs.  But the carpet is really pretty. I bought it on a trip to Tunisia, and it looks really good where it is.  It is really easy to exaggerate risk and overcompensate in risk management. My guess is that you don't need a paramedic on call, or a bodyguard. In our business, we're considering whether or not we need to continue to pay for legal protection.  We use a service called Legal Shield, and have been quite happy with it.  It costs us around 40 dollars per month, and we’ve never even been tempted to use it in the past 5 years.  We need to determine how much liability our business carries, particularly now that we work primarily in fine art.  Over the past 5 years we have spent $2,340 total on this service.  We need to weigh out what it would cost us to hire an attorney should something awful happen, or should we get sued.  While we've effectively wasted the $2,300 we've invested, my understanding is that going to trial under most circumstances will cost in excess of 10 thousand dollars. I haven't decided yet if the comfort is worth the price. Of all the artists I know, I have never heard of one of them facing litigation because of their art.

For creatives, there is always the risk of copyright or intellectual property infringement.  Consider what you would do if someone stole your art.  It’s not such a long shot.  A friend of mine was surfing the web and came across his artwork being sold by a company in China.  He checked with an attorney, and there was virtually nothing he could do about it.  To try and fight a corporate entity in China would have been prohibitively expensive, and even then there was no guarantee that justice would prevail.  Consider what kind, if any, of protection you should take with your images, music, or written words.

I am comfortable with the risk my carpet creates, because I surmise that the chances of something catastrophic occurring because of my rug are so slim.  Yet, when I’m flying on a plane, which is probably much safer than walking across my throw rug, I’m a nervous wreck.  And I think that is largely due to the perception of control.  Perhaps one of the biggest categories would be to consider the risks we can and can’t control, and the risks that we can influence.   Let's consider my art studio.  I can largely control safety issues there. If a risk is identified, I can make changes as needed, and close the door whenever I want.  I can’t however control whether the public will visit my studio.  I can market, decorate, play music, and have belly dancers, but I cannot know if people will actually come in to shop.  But I can influence people to stop by my studio for an event.  I can call, email, and snail mail invitations to collectors that already know my work and ask them to come to an opening at my studio on a Wednesday evening at 7pm.  

That is specifically what we’re doing… or will do when Covid backs off a bit.  We’re not making the sales we would like from opening the studio to the public, so we’re going to begin regular invitational events to bring in selected patrons and collectors we already know.  I still cannot control who shows up, but I can influence attendance to a high degree.   

Remember too that risks are not always financial.  Your reputation can be at stake as well.  As creatives, we are our brands, and therefore how we are perceived in the community, particularly among our collectors, may require risk management too.

When I worked for city governments, we had written plans for risk management, and that made sense to me on that level.  But how much effort do I need to put into a written document for my small business?  I’m not going to spend all that time and effort to do a major report. Who would read it? But what I try to do is make a list of the threats we identify throughout the year.  Then when it comes time to review our goals, we go over the list, and re-evaluate each year whether we need to address each specific risk.  Some things can be taken off the list, while others stay.  I mentioned insurance… that is non negotiable for us.  We fly drones, take equipment onto other people’s property, and many of the businesses we work with require that we carry a certain level of insurance to even contract work with us. 

Don't think for a moment that your business is ever going to be totally safe from risk, it won't. The trick is to plan for, and manage risk as best you can in an organized and reasonable way. We do fire drills at school because evidence shows that people who have planned for emergencies survive them better than those who have not. So take some time and figure out what your risks are, evaluate how significant they can be, and come up with a plan for dealing with them.

Welcome:  New subscriber Sylwia Iwan from Poland.  Thanks for joining us.  Check out her Instagram account: Iwansyvia.  She does some amazing nature photography.  I would love to hear from you Sylwia about your creative practice.

Giveaway:  We're still offering a free copy of our accounting spreadsheet. It's the one I use every day to organize and record our sales, expenses, receipts and projects. I wish I would have had something like it when I was first starting out. Even if your accounting systems are already in place, it might give a different perspective. Regardless, if you'd like a copy, just drop me your email address and I'll forward you the file. Use it any way you like, it's my gift to you. You can send me an email, or just go to www.johnbishopfineart.com and look for the tab called "giveaway".

John Bishop Fine Art's "Conversations for Freelance Creatives" is a weekly blog/vlog/podcast that creates a community, a conversation, between creatives in all sorts of fields at all sorts of levels.  We want to discuss what we’re learning, what we’ve experienced, and whom we’ve met in our journey of running a freelance creative business. John Bishop is a visual artist living in Houston, Texas. His work is largely abstract, and explores how to turn mythic, archetypal symbols into individual experiences allowing us to see them in a new way, with fresh eyes. His work can be seen online, or at his studio at Silver Street Studios, 2000 Edwards Street, Studio 108, in Houston.



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