Risk is the cornerstone of a successful business plan. If you’re a business owner, you’ve got to understand that playing it safe and going with the majority option may seem attractive at the time, but it’s not going to get you long-term gains. Eventually, your company will stagnate, and may even gain a reputation amongst its peers and competitors for not pushing the boat out or innovating in any way.
Of course, innovation comes with its own risks. When you forge forward into the uncertain future, you take a gamble on your finances, and you’re not always going to be successful in your endeavours. There’s got to be a way to take those risks, try for those new goals, and still be prepared in the event that you don’t quite make it this time, right? We’ve gathered some tips for new and veteran business owners alike on how to take risks and still be prepared for all outcomes.
Don’t be afraid to take out a loan
Whether it’s at the start or the end of your new business idea, taking out a loan could be the best way to arrange your finances and ensure you’re covered for any eventuality. Loans look great for your company’s (or your) credit score, and they’re an excellent injection of quick cash when things are looking grim, or even when you’re about to embark on something unknown and don’t quite know how it’s going to turn out. If you’re a smaller business or a sole trader, then looking into the world of guarantor loans is a strong start. Check out a trustworthy company like TrustTwo and learn how to name your guarantor and get your hands on a little extra capital.
Calculate your risk
There are three kinds of risks for businesses, broadly speaking. Knowing which of these risks your business is about to take upon itself can mean the difference between coming out unscathed and potentially suffering big losses.
- Calculable risks are easily understood and calculated. If you’re about to enter into a new market, and you research businesses who have already entered this market and find a very high failure rate, then chances are you will also struggle. You might not always be able to put a certain percentage on it, but you can be pretty sure.
- Ambiguous risks make up the majority of risky business endeavours, and they’re the ones that you need to watch out for. It’s usually possible to calculate some degree of success or failure with ambiguous risks, but you’re never going to be able to guarantee an outcome because of consumer variables and sudden market shifts.
- Unknown risks happen when your business ventures into the complete unknown. You’ve never seen this market before, or your product is completely and utterly unique. Too many of these quantities are unknown for you to make any kind of prediction, shaky or otherwise.
Anticipate and accept failure
If you take a risk, there’s a very good chance it won’t pay off. You have to be prepared for this eventuality, and humble enough to accept it when it happens. If you’re a sole trader, then you have to accept that you either made the wrong decision or that circumstances simply didn’t conspire to favour you this time, and move on. Trying to repeat that particular risk, or refusing to accept that it was a failure, will hurt your business significantly more than it will help, in both the long- and short-term. You need to have the humility and business sense to take the hit and move on, but don’t lose your risk-taking spirit, because…
Understand that risk sets you apart
“Being prepared for all outcomes” also means being prepared for success. Even if you take a risk and it doesn’t quite pay off, unless it was a completely nonsensical decision, many prospective clients and business partners will take note. They’ll understand that yours is the kind of outfit that isn’t afraid of failure, and doesn’t feel any shame or trepidation in pushing the boat out in order to establish a unique brand identity and market niche for yourself. Just by taking business risks, you’re differentiating yourself from the vast majority of businesses out there. Think of all the times your rivals ended up treading water instead of going for it, and you’ll understand what we mean.
Set aside some rainy-day capital
When you decide that your business is going to start taking risks, then you take it upon yourself to be financially prepared for those risks as well as mentally and emotionally prepared. If your business has employees, then it’s important to engage in damage limitation as much as possible; having some money squirreled away to ensure that you can cover the costs of your staff salaries should a risk go wrong is very important. Similarly, if you move into a new market and your products just aren’t cutting it, you’ll have a huge amount of stock that you need to move quickly, and having some money set aside for this will help to cover the shortfall when you’re not making profit for a while.