Many entrepreneurs are risk takers by nature, and that’s what has helped many of them succeed in business. By definition, a risk taker is an individual who seeks out opportunities and experiences despite the possibility of failure or consequences that may be unpleasant or even negative, whereas risk-averse people tend to avoid risks, often in favor of security and certainty. Is this you? How do you feel about risks in business? Are there any specific decisions you have made that were influenced by your innate level of risk tolerance? What are the pros and cons of being either a risk taker or risk-averse in business?
Understanding what it means to be risk-averse
Most people fall somewhere between these two extremes. But it’s important to know where you stand, as taking too many risks—or not enough—can be destructive for any business. If you’re risk-averse, you may be more likely to avoid making mistakes by sticking with what works or even by refusing to start something new at all. You might also worry that taking risks means opening yourself up to public scrutiny if your idea fails. This can prevent you from entering new markets or trying out new products that could put more money in your pocket (and help offset those nights out on the town).
The benefits of taking risks
There are some pretty obvious upsides to taking risks. First, you might get lucky! By definition, risk-takers take risks—which is why they’re called risk taker. For example, if you have an idea for a start-up business but you don’t really know what you’re doing—but it works out anyway—you might get very rich. Second, if your product or service is well-received by customers and/or investors, taking risks can also earn you name recognition and valuable connections within your industry.
Knowing when you should take a risk
You’re an entrepreneur. That means you are a risk taker by nature. However, taking risks is not always beneficial for your business—or even necessary. The key to assessing whether or not you should take a risk lies in how you feel about that risk personally. If you aren’t able to stomach discomfort and anxiety, then trying new things might not be good for your business long-term. In other words, being willing to take risks might mean different things for different people. Asking yourself what makes you anxious or uncomfortable can be helpful when determining if or when it’s worth taking a gamble on something new that could help grow your business down the road.
How to take smart risks
There are some inherent risks to being a risk taker, especially if you’re a solopreneur or run your own small business. You have no one else to share blame with or divide profits with if things go wrong. But that also means you don’t have anyone to celebrate successes with either. So if you’re going solo, what can you do to help offset these potential pitfalls? And how can you get started taking smart risks today? Let’s take a look…
Creating action plans for success if things go wrong
If you want to create and run your own business, you must be able to make educated decisions when it comes to risk. A successful entrepreneur understands that things don’t always go as planned—and that’s okay. If your startup goes south or you find yourself needing financial help, it’s critical that you put together an action plan for what to do if things start heading downhill. A great way to build up your risk-management skills is through taking classes on decision-making at a nearby college or small business development center. By learning how to assess potential risks more accurately, you’ll have an easier time creating future plans for success when everything goes according to plan.
Taking risks in business relationships
Successful business people are often defined by their ability to take risks. While these risk taker may always seem like they know what they’re doing, not all risks are created equal. Some risks can put you at odds with your friends, family or personal life and have potentially negative repercussions for your reputation if things don’t go according to plan. It’s important to think about both sides before making any decisions that could put you into an uncomfortable position.