More small business owners today are feeling optimistic about the economy, according to The Hartford 2013 Small Business Success Study. The majority say the number of risks they are taking has remained the same over the past six months, though.
Blame it on the economic downturn of 2008 and its aftermath – a difficult era for businesses of all sizes. Its effects are still fresh in the minds of many small business owners, causing them to hold back on financial decisions they fear they might come to regret. Yet current-day reports cite a U.S. economy that’s chugging along and steadily growing.
If you’ve been playing it safe with your business, the time may be ripe to take a chance again on risk. Calculated risks taken within your tolerance level can help you make decisions wisely while keeping your business energized and moving forward.
First, some basics on risk-taking.It’s human nature to overestimate the possibility of failure and underestimate our ability to respond should things go awry. That’s fear talking, and it can be immobilizing. Fact is, doing nothing is a risk and can be just as destructive to your business as risks taken recklessly. So let balance be your guide. Be willing to take calculated risks that stretch your comfort level, even just a bit.
Identify your goals and brainstorm potential opportunities. For instance, you might want to make your business more efficient, grow your customer base or find ways to better serve your existing customers. Looking more broadly, there may be new trends your business could capitalize on or industry gaps that could become your business strength.
Evaluate the risk level of each opportunity you identify, including the cost and benefits to your business, its potential for success and the worst possible consequences should your endeavor fail. Consult with your trusted advisors – attorney, accountant, insurance agent or industry expert – for their objective perspectives. Armed with information and a 360-degree view, you’ll be positioned to take calculated risks for rational reasons rather than risks based on a whim or a hunch.
Know how much you can afford to lose and work within that limit. Start small if you need to. Small steps that yield success can help build your tolerance for business risk, giving you the confidence to take a bigger step next time. And if the risk doesn’t pay off, you’ll be able to recover quickly and try something else.
Create a detailed plan of execution that covers all your bases – from funding and supplies to marketing and employee training. Then take the leap. Implement your plan meticulously, then take a step back and give it time to unfold in the real world.
Review the results and adjust or change course as required. Whatever the outcome, use your findings to inform future decisions and the next set of business risks you undertake.
Don’t be afraid to fail. Sometimes you need to take a step backward in order to make a leap forward. Trial and error is an essential part of growing a business. If you falter, pick yourself up, learn from your mistakes and continue moving forward.