If you want to get anywhere in business, at some point you’ll have to take a risk. Or more likely, risks; risk-taking will become a part of what you do.
Growing a small business will, at some point along the way, inevitably involve some degree of risk-taking. It could be relatively modest (taking on your very first employee, say) or significant (expanding).
To start, support and grow your business, risk will become a mainstay. Play your cards right and it may even become your friend, paving the way for growth and success.
But risky business can be tough – there are plenty of horror stories of companies getting into difficulty because they took a risk and it backfired. But often, it’s not the fact that they took a risk that defeated them, it’s the kind of risk they chose to take, and the way they weighed it up.
So, how to take business risks with confidence? Let’s take a look.
Remember, there are different types of risk
Like with financial risk, business risk can be complex. If you’re about to take a risk, figure out what kind of risk it is. That will help you decide if it’s one worth taking. Think of it like this:
Known risks – these kind of risks are based on data. Let’s say that the last time you embarked on a business development project you enjoyed a 10% increase in leads. It’s safe (although, of course, not foolproof) to assume the same pattern will repeat again.
Kind-of-unknown risks – these involve a mix of past experience and the unknown. So, let’s say that the business development project that brought you success was executed through LinkedIn. This time, you want to do it through another channel: email marketing. You know it’s worked before, albeit in a slightly different capacity.
Completely unknown risks – these are taken with zero evidence, hard of anecdotal, that they will work out. In business, this could be something like employing staff for the first time or launching a completely new product. You will need to weigh up your appetite for these kind of risks.
Experience can help you get better at risk
Life is a moving thing, and it is full of risk. We take risks every single day, from crossing the road to leaving something to chance. And, as we go through life and build up these risks, it can help us get better at taking them. Because we’ve been there before.
The Psychology of Risk Taking infographic from 888poker shows that, as adults, we make a whopping 35,000 decisions every day. That’s a heck of a lot of risks. What’s more, building experience in taking risks can help us get better at executing them. 888poker compared the brain activity of beginner and experienced poker players, finding that seasoned players had different brain activity to the newbies, which helped them execute the ‘all-in’ – a highly risky poker play.
Some risks really aren’t worth taking
One way to get better at risk-taking is to not take them. Or rather, to get strategic. Sometimes a risk really isn’t worth taking. If it’s a known risk, you might have the data to back it up. If it’s unknown, you might just have a gut instinct that it won’t play out.
As a business, develop some risk warning signs. What would really put you off taking a risk? What would be a massive no-no? Work out what these are and work them into your business strategy.
Don’t take a risk when you’re emotional
Anger, love, jealousy and desire are just some of the many complex human emotions that can lead us to take risks. Importantly, these are impulsive risks, based on raw emotion rather than objective clarity.
When building a small business, avoid making a risky decision when you’re feeling emotional. Make them in the clear light of day, consulting as many colleagues as possible.
While risks are inherently, well, risky, there are ways you can get better at taking them. And if you’re going to get ahead in business, you’re going to need to take them from time to time. Use knowledge and experience to take sensible risks, rather than impulsively launching yourself into the unknown.
Further reading on risk-taking
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