Column: A guide to managing risk
7 Keys to Overcoming Risk on the Path to Success
John Burroughs famously wrote, “Leap and the net will appear.” However, for many people, the idea of taking that leap can be so scary that they never take action at all. As an entrepreneur, you’ll most likely have to assume some level of risk at some point in order to make your goals a reality. As such, learning how to effectively manage risk is a vital skill in helping you attain success.
Not sure how to improve your relationship with risk? Start by following these tips:
1. Acknowledge that risk is part of entrepreneurship.
You never have to like risk, but you do need to accept that it exists. Pretending it’s not there won’t make it go away. It can be helpful to remember this: Most things that are worthwhile require a certain level of risk. Whether executing a trade in the stock market, starting a new business, expanding an existing business or even just asking for a raise, you’ll have to put something on the line, be it money or simply your pride. However, it can be helpful to remember that often, the potential reward makes the risk worthwhile.
2. Be prepared.
If you were going parachute jumping, you’d definitely check that your chute was working before you dived out of the plane. Likewise, in business, it’s important to assess your preparedness before taking a risk. First, check your mindset. Are you feeling calm, have you gotten enough sleep, have you eaten? Second, check your preparedness for the specific task or undertaking. For instance, if you’re about to sign a lease for a business space, do you have your paperwork in order and all of the necessary documentation? Being prepared can help you manage risk more effectively by keeping you in a calm, collected state of mind.
3. Do your research.
No matter what kind of risk you’re taking on, from courting a new client to investing in a new business, it’s important to make sure that your moves are calculated. This means you’ve got to do your research. For example, if you’re about to invest in a food truck, you should learn all that you can about food trucks, including zoning laws, fees and permits, parking rules and so on. By being able to anticipate potential obstacles, you’ll be better able to deal with them if and when they arise.
4. Consider the best-case scenario.
A little bit of optimism can go a long way in terms of giving you the bravery to follow through with taking a risk. So consider this: What’s the best that could happen? Visualize the best-case scenario before taking a risk. Consider how it would feel to attain your goals. Keeping your eyes on the prize can help you manage risk by helping you stay motivated.
5. Consider the worst-case scenario.
This might not be as fun as considering the best-case scenario, but it’s equally important. Considering what could go wrong when taking a risk isn’t about giving yourself a panic attack. Rather, it’s about helping you consider what could go wrong so that you can take proactive steps to avoid such outcomes.
6. Be ready to cut your losses.
I’m a trader, and part of my success comes from the fact that I am ready and willing to cut losses if a trade goes sour. Even if you’re not involved in the stock market, the ability to cut your losses can help you manage risk more effectively. For example, if you’re getting involved in a restaurant venture, you may want to consider how much you’re willing to lose before opening. Setting specific parameters before taking on a business venture and then sticking to them can be an effective tool for managing risk and helping minimize your losses.
7. Learn from every experience.
Remember this: No matter what happens after taking a risk, you’ll always learn from the experience. For instance, say you’ve decided to take over a retail space on a busy shopping street. Even if the business fails, you’ll still learn a lot about running a retail busines, town politics and small-business marketing. And if the business does well, you’ll learn valuable skills about marketing, employee-management and publicity. Sure, most people would rather experience the successful scenario. However, recognize that even if the outcome is not great, that doesn’t mean it’s been a waste of time. This can help you better manage risk by helping you remember that you’ll always gain something.