You’ve heard it before: “Fortune favors the bold.” Or the ever-popular, “Nothing ventured, nothing gained.” There’s also, “The only way to fail is to start.” And my personal favorite and go-to: “Learn from your mistakes.”
All of those pithy, motivational statements focus on one underlying truth: Taking risks is inherent in everything worthwhile. Yes, risk can be stressful, worrying, even frightening. However, you don’t have to let that stand in the way of your success as an entrepreneur.
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There are simple, easy ways to manage and defend against risk while building a thriving business. In fact, here’s why taking risks is good for business:
Overcome inherent fear
Entrepreneurs experience many common fears, including the of fear rejection or criticism, be it from potential customers, peers, or other industry leaders; but you must overcome your fear of criticism. Being criticized is a risk you take as an entrepreneur, but the rewards are well worth it.
A simple way to overcome this problem is to learn how to talk to people about the things that excite you. Yes, it can be daunting to talk to others about your passion out of fear of dismissal, but if you don’t, you’ll never build that passion into a successful business. You must learn how to distill your passion into a business pitch, which you can deliver to potential investors, employees and customers.
Test the waters
Maybe you’re a new entrepreneur, but you have no sales or marketing experience and the fear of the unknown is holding you back. Think of it this way: Marketing is nothing more than talking to other people about something you’re passionate about. It’s also fraught with risk. Will your ad flop? Will you blow your meager marketing budget with nothing to show for it?
One trick is to use small budgets to try new marketing techniques until you find what works for you and what doesn’t. For instance, set aside a small amount of funds to play with Facebook Ads to see if they work for you. That way, you’re trying new marketing methods and pushing yourself to grow despite the risk, but hedging your bets at the same time.
Stretching your risk muscles
When I was younger, I did not have a good understanding of what risk looked like or how to defend against it. It was not until I started building my business that I truly understood what was at stake. Once I understood what risk really represented — the loss of everything I had worked so hard to attain — I was able to appreciate it better and create accurate defense strategies.
It also taught me an important lesson about being grateful for what I have. Risk is an important tool for mindfulness. It helps you appreciate and build gratitude in your life for what you have. When risk rises, the threat to what you have and what you have built increases. You can view those things — your business, your life, your family, your home — in a new light. Gratitude blossoms in your heart for those things and you begin to appreciate them in new ways.
Gratitude is a powerful force for good in your life and spills over into other areas. According to Forbes, “a meaningful increase in well-being” yields, on average, about a 10% increase in productivity. Change your outlook, and you just may have a better chance of scaling your business.
Understanding your risk tolerance
As an entrepreneur, it is important to understand both your personal risk tolerance and your ability to weather financial risk. The two are very different.
Risk tolerance as discussed by most people is really just a measure of how financially stable you are and whether a failure to generate a return on investment — whether that’s marketing methods or a new product line — would cripple your business.
What we’re talking about here is more your personal risk tolerance, or your drive to overcome and even enjoy the ride. There are two types of people: risk-averse and risk-tolerant.
If you prefer things neat and tidy, planned ahead, and buttoned up, then chances are good you’re risk-averse. Baby steps are best suited not just for your budget, but for your sense of sanity. If you’re more adventurous and like to try new things, you’re probably risk-tolerant. Bigger steps and larger risks help make the startup journey more worthwhile and enjoyable.
Diversifying your risk
Diversification is a critical tool for defending against risk in running a business, just as it is for investors. The key to successfully diversifying your risk is understanding where your gaps lie. For instance, having just a single sales channel would be a gap. Building out secondary and tertiary distribution channels is critical for defending against risk. Put another way, you should never place all your eggs in a single basket.
For instance, it was a huge risk to launch HyperGo’s mint-scented wipe so soon after releasing the unscented wipe. It was a big investment for the company, and a failure of either of the two product lines represented a massive risk to our company’s future. However, a very short time later, the mint-scented version started to outsell the unscented wipes, and, today, mint is a customer favorite. It was a risky move to invest most of our profit into a new scent, but our revenue has increased immensely as a result. In the end, it was worth the risk.
Key takeaways: When it comes to taking risks, embrace the unknown
Risk will always be present. As an entrepreneur, your job is to identify it, quantify it, plan for it, and, ultimately, embrace it. Understand that growth requires risk. If you fail to move forward because of fear of failure, you’ll fail to grow. Embrace risk, but do so wisely, from an informed position. Plan for what might go wrong, but realize that you cannot achieve success without also encountering risk.