Taking risks is the key to success. As Facebook founder Mark Zuckerberg said, “In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”
Countless entrepreneurs have taken risks to get their businesses off the ground and turn them into success stories – often against tremendous odds. That means taking big chances without knowing the outcome. But it does not mean going into business blindly and then expecting great results.
Instead, successfully approaching risk requires understanding, careful planning and a solid strategy. Armed with this information, SMB owners can take calculated risks – carefully considered decisions that expose the business to a degree of financial risk that is counterbalanced by a reasonable possibility of benefit.
In business, people take risks for five key reasons:
1. You will never know unless you try
Nobody can really be sure if a risk will pay off, even if an in-depth cost-benefit analysis has been conducted. But if you want your business to succeed, risks are necessary.
For SMB owners, taking risks and business growth go hand in hand. They are generally comfortable with some degree of uncertainty. However, most do plan ahead to help mitigate the potential for failure. Having a business strategy and developing financial forecasts are just two ways to help navigate the unknown.
2. You learn from taking risks
No one learns without making mistakes. In fact, we learn new skills when we make mistakes. Some risks may not pay off, but successful business leaders mostly look at failure as an opportunity to learn. Failure helps shape future business strategies and can eventually lead to business growth.
Failure enables people to reassess, learn from the experience, and adjust their thinking. Whether you succeed or fail, it is important to have a review process in place that can help you to analyse what happened and why, and how to avoid repeating the mistakes. This will ensure that the effort you expended will not go to waste because you can apply what you learned to your next big challenge.
3. Innovation requires risk-taking
If your business doesn’t innovate, it will lose its competitive advantage to those that do bring new ideas to the market. Innovation involves change, and radical change doesn’t come without risks. Innovative thinking can help you predict the market and keep up with customer needs.
In a constantly shifting world, business leaders view risk as a cost of opportunity, understanding that the clearer they are about what is involved the easier it is to contain the risk and to succeed.
4. The brave already have an edge
Because most people tend to avoid risk, those who are brave enough to take risks already have a competitive advantage, often by being the first to market with a product or service. Amazon and eBay are examples of companies that took risks and benefitted from their first-mover advantage.
First movers in an industry are almost always copied by competitors that attempt to capitalise on the first mover’s success and gain market share. However, first movers have usually established sufficient market share and a solid enough customer base to continue to dominate the market.
5. Risk-takers are happier
A study on risk-taking revealed that people who enjoy taking risks may be more content and satisfied with their lives. In addition, people with high self-confidence are more confident about making decisions and are more likely to be risk-takers. They feel proud of the fact that they are willing to take risks to grow their business.
Accomplishment builds confidence and vice-versa, in a virtuous circle of satisfying experiences that give people the will to persevere. It’s about finding the right balance between caution and risk-taking and doing your due diligence before making any decisions.