Business is about risk. The saying, ‘no risk, no reward’ certainly has played out in some rather explosive ways throughout the course of history. Just think of some of the biggest entrepreneurial risk-takers: Tim Westergren (Pandora founder). In its early days, Pandora, nearly broke, was on the verge of extinction. Westergren maxed out his credit cards to keep his venture going—paid off! Donald Trump. At one point in his career, facing nearly $900 billion in debt, he declared bankruptcy and just kept on working—Hail to the Chief!
So you see, risk can certainly pay off, but you have to remember to be smart about it, manage your risk, and understand where your risk threshold really is. For instance, are you willing to max out those credit cards, how much family and personal time are you will to give up, would you be able to pass up a more stable career opportunity? Asking yourself these types of questions and providing honest, real answers is a great first step in terms of your overall risk management plan.
How Much of a Risk Taker Are You?
You are super excited about your new business concept. Sure that it is the next million dollar idea, you are ready to go all-in and ultimately make it big. But have you really assessed where your risk baseline is? In other words, if at the outset you have to put in a significant portion of your own money, without being guaranteed any sort of a return, are you good with that?
Check your risk threshold against the “how well will I sleep” risk-o-meter.
The scenario: your new business requires that you invest let’s say 75% of your entire savings. Your response:
1) I will sleep like a baby
2) A bit of tossing and turning
3) It’s 2:00 am and I am still wide awake
4) I think I’m seeing ghosts
You get the point. Knowing yourself and how much risk you can actually absorb and appropriately manage is critical. Make a list. Decide what you can and cannot handle and work from there. This list will enable you to better visualize what your business idea really entails. Odds are, you’re merely seeing dollar signs and viral accolades in this initial “dream big” stage, and that’s terrific. But now it’s time to settle down and closely assess the consequent risks.
So How do You Manage Those Risks?
Everyone handles the stress and pressures of business in their own way, so it’s rather difficult to come up with an across-the-board strategy for risk management. And as every business venture is also unique, each entrepreneur will have their own approach when it comes to tackling the risks associated. All in all however, you can look at risk management in terms of three basic realities. You can:
- Accept the risks and go for it.
- Minimize your risks.
- Outsource some of the risk.
These are all strategies that can certainly work for your new startup, as all have their proper time and place.
If for instance, you need a website for your company, and, while you’re not exactly a developer or designer, you mull over the idea of investing a great deal of time and money to try and create and launch this new site on your own. Herein lies a risk-- again not merely one of money, but an incredible amount of time as well. And who knows how it’ll turn out. In this situation, you might want to transfer the risk and outsource this particular project to a talented freelance web developer.
Another situation: You are creating a product and selling it online. Problem is, the product does not seem to be that popular. All of your marketing appears to be in place--thanks to the fact that you outsourced that risk to a marketing expert. So what’s the problem? And now what happens if this product never sells…do you simply shut your doors and chalk it up to bad timing, throwing all of your investment down the drain? This is where you should’ve taken steps to minimize your risk via a solid and viable plan b, and yes, also a plan c. As an entrepreneur, you need to have a stable of backup plans in your business arsenal. Maybe it’s a product tweak, maybe it’s entering new markets, maybe it’s completely reinventing your product. Whatever the plan, just make sure you have one to help minimize your risk.
And of course there’s the ‘just go for it’ strategy. There’s absolutely nothing wrong with this, just make sure that you are prepared for losses, you plan on setbacks, and overall your expectations align with the fact that there are indeed risks involved. As long as you’re willing to accept that, go for it!
Risk Management in Review: Moving On From Here
Ok, so you measured your risk-taking capacity. You understand where the risks lie as you have your trusty list in hand, and you have a general idea of how you are going to approach the various risks associated with starting your own business—great!
As your business develops and you begin to see that some of your risks are indeed paying off, then perhaps it’s time to take and manage more. You can, for example, start to outsource additional components of your business. You don’t necessarily have to hire full-time or even part-time staff, but instead enlist the services of some highly experienced freelance content writers, graphic designers, even virtual assistants. Start to think bigger, if your business is doing well, you can venture more. Just always keep your risk management plan front and center. Adjust and tweak when necessary, and you should be off to a great start.
Freelancer.com is a great platform when it comes to helping you outsource some of that risk. With our ultra-creative and skilled pool of freelance marketers, developers and bookkeepers, to name but a few, you can certainly rest assured that at least that part of your risk will be well managed! Post a project today!