Risk-taking is a necessary part of the entire process of starting a business. Many entrepreneurs believe the key to success is having the courage to take risks, but in practice, the strongest and the most profitable businesses are managed by people who can calculate and limit potential dangers. In other words, you are more likely to succeed and develop your business faster, if you manage to minimize the risk.
Taking risks may be very rewarding, but it has two huge downsides – it can put all your finances in jeopardy and ruin important professional and business relationships. Some businesses are riskier than others and the best way to avoid future failures and disappointments is starting a venture that doesn’t require a huge amount of risk. This is the smartest strategy, which will help you and your new small business thrive and expand, even if you face strong competition or slower market conditions. When determining whether your business will be more or less risky, there are several important things to consider.
Online vs. off – There is a greater financial risk when building and maintain a brick-and-mortar store – think about the property or rental prices, staff, maintenance costs, and many others. Online stores on the other hand are much more affordable, quickly done and easier to maintain. However, customers will always love local grocery shops or pharmacies, big city malls, and shiny boutiques.
Franchise option – Most people start their businesses from scratch, but this requires a lot of risk-taking and finding what works and what not. In this case, you will need at least two years to succeed. Franchises hugely reduce the risk – they will provide you with a brand, they will offer you help, including advice and financing options, and most of all, they will have a proved, refined system which already works.
Product or service? – When you think of business, what pops up into your mind? It’s often associated with creating, manufacturing and offering a product. But the safer option is to offer some kind of service. There are two major reasons for this – these businesses are cheaper to create and all expenses are basically insignificant in comparison with manufacturing firms or even cafes and restaurants.
Full dedication or keeping your job? – It’s better to keep your job at the very start of your new venture. You may have limited time for your business, but you will be able to have a steady income until you see some real return.
Diversify your income – In case the costs of opening your firm, store or coffee shop are not huge and are able to put away some finances, look where to invest them. Having multiple streams of income is even better than saving, so diversify your income by putting money in rental properties, reselling things on the web, writing a blog, and so on.
Try a home-based business – Starting a business from scratch will require a lot of initial capital, unless it’s home-based. In addition, there will be less stress and more people who will help and support you.
When starting a small business of any kind, you will need to determine your risk tolerance. Are you investing too many resources in something that seems unpopular, old-fashioned, and unoriginal? Are the money and time really worth it? Is the risk worth it? Once you are capable of answering those questions, you will know whether realizing your idea will pay off.