Every business professional knows about risk. Each opportunity has the potential to be a success...or a complete flop. The challenge, of course, is knowing how much to gamble.
But there is one sure thing: No entrepreneur can avoid taking risks. Without accepting some risk, you are doomed.
In his book, "The Risk Advantage: Embracing the Entrepreneur's Unexpected Edge," Tom Pannagio--entrepreneur and former race car driver--describes how savvy business owners must consider two essential risks in every opportunity: decision and change. "First, they decide on a direction to jump, and then they make adjustments and innovations to keep going and growing."
Writer, Martin Zwilling, compares it to looking at both sides of a coin: "Obviously you are looking for the opportunity side to be bigger than the risk side."
Zwilling talks about how to manage risk in four important business areas:
While continuing to nurture current projects, don't be afraid of looking into completely new ideas. New opportunities will carry a risk, but when balanced with the certainty of "now," growth can be huge.
A startup comes with financial challenges--and opportunities. Careful assessment of funding and debt is crucial. Zwilling writes, "Then you walk the delicate balance between burn rates, revenue flows versus expenses, investment in marketing, and employees."
Just because your business is up and running, don't assume that nothing can be improved. Examine each process (a flow chart can be useful) and determine where things break down. Efficiency--and savings--can always be improved. Continue to do this on a regular basis.
This is a tough one. Grow "organically," and you may never get anywhere. Try to expand too quickly, and the business can implode. With many competitors, it's essential to find a balance that keeps you on track.
Zwilling and Panaggio go on to list three risks that will make or break every entrepreneur:
5. Risk of Failing:
There it is, the dirty secret. It's easy to play things safe. However, failure is a lesson...and an opportunity to change. Zwilling writes, "Every investor believes that entrepreneurs learn more from failures than from successes. Short-term failures lead to long-term successes." Remember Thomas Edison, who discovered 1,000 ways to NOT make a lightbulb.
6. Risk of Proactive Marketing
You need customers NOW. That's what proactive marketing is all about. Never view marketing as an expense; it's your future. Invest!
7. Risk of Being your Own Customer
Howard Schultz, the CEO of Starbucks knows about this. He has stood in many lines at many Starbucks, just to see how customers are treated. He observes the stores and how inventory is displayed; he uses the bathrooms; he asks for special drinks. Each time, he learns something. Are you doing the same?
Risk is part of our everyday life as an entrepreneur and the better you manage those risk the more likely you will be successful.
Please share on social media if you found this post helpful. If you have a comment or question, please post and add your voice to the conversation.