Entrepreneurship and risk go hand in hand. Whether you’re launching your startup or expanding your service offerings, every venture brings the risk of failure. Yet only 17 per cent of executives surveyed said their risk-evaluation procedures were working, and a staggering 70 per cent said their companies had no such procedures in place.
Every opportunity should drive forward your company’s long-term vision, but you must ensure you’re making smart moves and not blind leaps of faith.
Instead of taking each decision as it comes, formulate a deliberate risk-evaluation process from the get-go. Every opportunity should drive forward your company’s long-term vision, but there are a few principles that ensure you’re making smart moves when it comes to risk — not blind leaps of faith.
Define Your Goals
Before taking a risk, it is essential to define your goals. Brad Sugars, founder and CEO of ActionCOACH, advises entrepreneurs to have a clear understanding of their objectives and what they hope to achieve through a risk. This can include revenue goals, market share objectives, or long-term growth targets. By defining your goals, you can better evaluate the potential outcomes of a risk and determine whether it is worth taking.
Balance Your Results With Innovation
As a leader, you don’t want to stick to the status quo, but you can’t completely abandon business as usual. This means balancing two competing priorities: maintaining your revenue model and driving innovation. The moment you stop looking for new opportunities, your business risks becoming obsolete.
To identify the best opportunities, you have to understand how your market is evolving. Otherwise, industry changes and profitable opportunities will fly past you, giving your competitors an advantage. Stay on top of change by constantly monitoring your environment, examining other industries’ best practices, staying current on market trends and continually improving yourself. Look for emerging patterns and draw actionable insights from them so you can make informed decisions about where to invest.
Evaluate Opportunities Critically
Don’t take advantage of every opportunity that comes your way. Take a step back and consider the risks involved. Start by gathering as much useful information as possible. Determine the order and evaluate your options by listing the possible outcomes. This approach will ensure that you are not driven by your emotions or held back by fear.
Then go back to your company’s specific pricing guidelines. Has a new product, service or business been added to your core competencies? Do you feel confident on the field? If the detail is too far from your existing product, customers will not want to buy it from you.
You need to determine the appropriate level of investment, not only in terms of raising money but also in terms of creating business copy. How will this bring in new customers or distribute existing revenue, and what is the appropriate time frame to generate returns?
Sometimes Choose To Say NO Over YES
As you calculate risks, be prepared to turn down some really good opportunities. If you’re an idea person, saying no can be hard.
Over time, you will see that saying yes to everything would mean going wide but not deep. It’s better (and more profitable) to be an expert in a few areas than to offer shallow knowledge in everything.
Have A Plan
Developing a plan is essential for taking a calculated risk. It is advisable that entrepreneurs develop a plan that outlines the steps required to achieve their goals and mitigate the potential risks of a risk. This can include a detailed financial plan, a marketing plan, or an operational plan. By developing a plan, entrepreneurs can better evaluate the potential outcomes of a risk and determine whether it is worth taking.
Be Ready To Change Direction
Once you’ve walked through this process, keep your forward-focused mindset. As you start implementing new ideas, you may need to change course.
Developing a new product is risky — you’re wagering time, money and talent. As any entrepreneur will tell you, the risks don’t disappear after your startup gets off the ground. To grow, you have to explore new products, offer new services and experiment with new markets. By developing and implementing a risk-evaluation procedure that works for your business, you can plan your next move with your eyes wide open.
Taking action is the final step in taking a calculated risk. Brad advises entrepreneurs to take decisive action once they have conducted their research, analyzed the potential risks, used data to inform their decisions, and developed a plan. This can include launching a new product, expanding into a new market, or investing in a new technology. By taking action, entrepreneurs can turn their calculated risk into a reality and drive growth and success.
Taking calculated risks is essential for entrepreneurial success. By defining your goals, understanding the risks, using data to inform decisions, developing a plan, ever ready to change course, saying no instead of saying yes, taking action, etc. Entrepreneurs can take calculated risks that are informed, strategic, and ultimately leading to success.