One of the big fears people have about having their own business is that it is risky. And that’s true.
I don’t want to minimize that, because you’re taking a risk to put your economic welfare in your own hands. (You’re also taking a risk, and I would argue a bigger one, to put your economic well-being in someone else’s hands, but that’s for another article!)
What’s also true is that taking risks to have your own business can be reduced by the choices you make. And having your own business has big benefits.
In your business, you have 3 kinds of risk: 1) risks you can prevent, 2) risks you can reduce, and 3) risks you have little control over.
Let’s clean things up right away by looking at #3. Examples of risks you have no control over are external to your company. They include the weather (if you have a weather-affected business), or other companies popping up that do the same thing.
Risks you have little control over can’t be prevented. But they can be identified, and the sooner you can do so, the better. Then you can decide what to do to minimize their effects. Make a list of potential external risks and include what you plan to do to monitor them part of your overall strategy.
For example, keeping an eye on other companies popping up that do the same thing can include regular internet searches and consistently following through on news you may hear through your contacts of a new company on the scene. Depending on what you learn, you can decide if this new company provides you with:
· New ideas for offerings you can create
· Opportunities for collaboration and joint ventures
· Greater clarity for your own marketing, to help prospects distinguish you as a provider.
Some risks you can prevent by getting insurance, or obtaining legal advice. Relatively easy solutions can do the trick.
Next we’ll look at the first kind of risk, #1: risks you can prevent. We’re talking about risks within your own company. For example, you’ll want to ensure that your processes are clear, so that everyone involved can follow them with a minimum of errors or time wasted in confusion.
These are the easiest risks to manage, but not everyone does so because procedures aren’t sexy. They are, though, the backbone of providing a consistent product or service that your clients can rely on.
You can manage these preventable risks by monitoring and guiding people and processes toward the standards of quality you set. Create a procedures manual and test it out, to ensure everyone knows what to do. Add a step for quality testing, to see if the procedures are clear and being followed.
Finally, the second kind of risk, #2: risks you can reduce, are the most fun. These are risks you voluntarily take so that you can improve your outcomes. For example, a bank takes on risk when it lends money. You may take on risk when you spend time researching a new possibility for an offering.
This kind of risk is strategic. The risk itself isn’t in itself undesirable. The flip side of this kind of risk is opportunity. Managing these risks effectively increases the possibility of gain. Reaching out to a potential new client group that is large and potentially lucrative is a risk you may want to take for the high potential income.
Minimizing risks takes some thinking and planning. First, how can you minimize the risk before you begin? In our example, you can get to know your new group of prospective clients really well. Do research. Talk to them. Really invest in understanding what their problems are and how you might be able to help solve them. Get to know them personally: build relationships.
Decide how you’re going to manage the risk factor once your risky venture with this new client group is underway. Track your progress. Is your investment paying off? Don’t get stuck with the same strategy if it’s not working. Make adjustments quickly. Change direction as you learn more, if it’s warranted.
As a general rule, make the scale of your effort to prevent or reduce a risk consistent with its consequences. If the consequences are major, spend more time and energy than if the consequences are minor. There may even be risks you can ignore, because they’re really unlikely and have minor consequences.
Risk management is part art, part science. These risk management strategies can help you take on bigger risks, with bigger rewards for everyone. It’s worth putting energy into thinking things through before you begin to invest time and energy.
Taking calculated risks, making good decisions around what’s probable and what you’re willing to do, is a good way to keep the risk factor in your business to a minimum. Your business doesn’t have to be so risky.