Phil Portman is a serial entrepreneur and the Founder & CEO of Textdrip — a small business SMS marketing tool to automate SMS campaigns.
“To grow my business, I must try new things. If I don’t, my business might fall behind. Competitors will move forward with new ideas and innovations.” Do such thoughts come to your mind? You’re not alone!
To be honest, risk-taking is an essential skill every entrepreneur should develop. Have you heard the famous saying of John A. Shedd? “A Ship in the harbor is safe, but it’s not what ships are built for.” The other one I love the most is by David Lloyd George: “Don’t be afraid to take a big step. You can’t cross a chasm in two small jumps.”
But here the question is: How much risk is too much?
As a serial entrepreneur, I’ve learned that risk-taking can boost growth and lead to setbacks. My experience taught me that balance (calculated risk) is key to achieving success and dealing with failures.
In this article, I’ll share my thoughts on taking calculated risks, assessing your limits and strategies to avoid straining yourself. I firmly believe that “Entrepreneurship is neither a science nor an art. It’s a practice.” So, let’s explore how you can master this practice regarding risk.
The Nature Of Risk In Entrepreneurship
When it comes to risk in entrepreneurship, most entrepreneurs confine it to financial investments. Here, they’re mistaken. Risk means market uncertainties, operational challenges and brand reputation in business. If you want to succeed, you must understand the breadth of risks that you’ll face. The risks you’ll most probably deal with are:
• Financial Risk: We all know this! In it, we either invest our savings or take out debt.
• Market Risk: Launching a product/service in an uncertain market without gaining in-depth knowledge and deciding based on predictions or trends.
• Reputation Risk: What you do, how you do it and what you don’t do can influence how people perceive your brand.
• Operational Risk: You need to deal with technical glitches or failures, staffing or supply chain interruptions.
At Textdrip, we wanted to expand into healthcare-related markets. We took a leap, but not mindlessly. We first invested our time and energy in understanding the industry’s needs and, after that, committed resources. And the gamble paid off! The reason? We took the calculated risk and approached it strategically.
Remember that we can’t avoid taking risks in business, but we should handle them with care so they become the reason for our growth rather than a trigger for failure.
The Importance Of Risk-Taking For Entrepreneurs
Undoubtedly, each entrepreneur should take a risk. It is crucial for innovation and growth. However, you should weigh the risks versus rewards. Thoroughly understand the situation, weigh the good against the bad and decide based on facts, not feelings. As Steve Jobs once said, “Innovation is not about saying yes to everything. It’s about saying no to all but the most crucial features.”
Don’t take unnecessary risks, understand the perfect time to take risks, make all possible calculations, evaluate and make the best decision that lowers your risk. There is no doubt that risks drive progress. Keep all factors in mind and be bold when your competitors hesitate. It’ll give you the edge.
How To Assess And Manage Risk
Risk-taking is essential, but don’t dive without a plan. It’ll be a disaster for your business. To assess and manage risk effectively, make data-driven decisions because numbers never lie and guide you in minimizing uncertainty. Do a SWOT analysis by evaluating your strengths, weaknesses, opportunities and threats, and after that, make any risky decision.
Take your customers’ feedback seriously, as they can provide you with the clearest insights into whether or not it is worth taking a risk. Understand your risk tolerance level, whether it’s financial, operational or calculated risks. If you want to mitigate risks, spread your resources wisely without betting everything on a single venture. Keep the backup plan ready if things don’t go as expected.
At Textdrip, we take a proactive approach. We measure customer satisfaction and take it seriously. It helps us identify areas where improvement is needed and mitigate risks before escalating. It keeps us aligned with our goals and minimizes surprises.
The Danger Of Excessive Risks
Taking risks is necessary, but don’t cross the line, as it can be dangerous. Here are some signs of extreme risks.
• You feel the financial strain.
• Become overconfident that every decision will succeed without proper evaluation.
• Experience burnout and strained relationships.
You’ll face consequences like financial trouble and a negative impact on your physical and mental health.
I remember at the start of my career when I took on too much debt, hoping to scale my business quickly. The business had potential, but my approach nearly led to financial and emotional burnout. That experience taught me the importance of slowing down and assessing risks carefully.
The Right Balance: How Much Risk Is Too Much?
Maintaining the right balance is important. So, make courageous decisions with careful planning. Perform thorough research before launching a new product/service. Expand in the market where you see a clear opportunity. Don’t take risks during uncertain times. Ensure potential risks align with your financial stability and team resources.
At Textdrip, we did comprehensive market research before entering into healthcare. It ensured there was demand and made the risks manageable and meaningful.
Conclusion
Risk-taking is a fundamental part of entrepreneurship, but it should be calculated. Understand when to jump and when to reevaluate. Taking risks gets much easier with practice.
To win, you have to bet. However, risking your money, energy and ideas is a skill you can learn.
How? By continuously evaluating risk strategies, learning from past experiences and finding the right balance to ensure sustainable growth.
As the founder and CEO of Textdrip, I have experienced learning, progress, wins and setbacks while taking calculated risks. Each step has made me stronger and better. So, I encourage you to assess your risk-taking journey and find the perfect balance for long-term success.
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