Risk-taking is a part of entrepreneurial life. Entrepreneurs must know when to seek loans, when to expand, when to risk a steady salary in favor of self-employment and how to judge the potential benefits of taking a risk. Entrepreneurs have to have a risk-taking spirit, because not taking risks can’t even get off the ground, forget the further growth. Actually it is a kind of balancing act; their risks must be calculated, as taking excessive risk without taking anything in consideration can destroy a business and its owner’s credit, finances and personal life.
Every business required some degree of risk-taking ability. At the juncture, when a startup entrepreneur reaches to the conclusion to leave his paid job and enter into own venture; may be he/she is entering by risking financial health. Let’s make this more comprehensible by another example—expanding business from a single store to a double store or to another territory always carries the risk of failure and dropping revenues. Some entrepreneurs opt to leave their studies to focus on their entrepreneurship career, but in case their business fails, the business owner will be left with formal education and left with no capital to complete studies as well.
Benefits of Risks
Willingness and zeal to take risk is the key of achieving competitive edge to an entrepreneur. For example, the idea of opening a second store where any other business owner afraid to open can pay off with a large customer base. Taking loans can satiate the need of necessary capital needed to kick start a business. As no entrepreneurship effort comes with a guarantee of success, only risks can move a business forward. One can gain the prominence and reputation of being a businessman of acumen who knows how to make good business moves with a perfect assessment. Entrepreneurs with the unique ability to take the calculated risk can sense the hidden opportunities which others not able to sense.
Drawbacks of Risks
The most obvious drawback of risk in independent business is the failure that cost things like—Credit, your personal time, money, or the whole business. This sort of failure is directly questioned the ability of the business owner to assess the risk accurately. Owners, who don’t have the idea to take risk calculatedly, lose the credibility in the market, among consumers and employees. Sometimes they overestimate their potential to achieve success, this resulting in serious disasters in finance and end in huge disappointment.
A strategic business planning and acumen for financial management can help entrepreneurs to evaluate which risks can be beneficial to them and at which extent. As not every business owner is the master of the business he/she involved in, they can hire experts to make growth-orientated decisions. Like a legal expert can advise on the legal risks with the decision. On the same lines, an accountant can help in projects profits and losses or an expert can guide you about the latest market trends. Business owners are more susceptible to failure in their startup entrepreneurship efforts who take enough risks without considering all the possible alternatives. So always consider all the alternatives and be prepared for the worst outcome of the decision. Always keep a circle of trustworthy people and never take any business decision randomly or based on a whim.