Ready To Take a Business Risk? Answer These Five Questions to Find Out
No risk, no reward. You miss 100 percent of the shots you don’t take. Every strikeout gets you closer to a home run. The cliches abound, but you get the point. Sometimes you have to grab the bull by the horns and reach for the brass ring; sorry, I can’t stop myself.
At one time or another, we are all presented with an opportunity that poses risk, and we have to decide what to do about it. In my case, I quit my job and moved my wife, toddler and newborn to New England with no job and no prospects. That was 15 years ago, and it was the best business decision I ever made. Of course, I have a deplorable excess of confidence, but that’s only part of it. Before you can make such a momentous decision, you need to determine your level of risk tolerance. To help you decide whether to take a career or business risk, ask yourself these questions.
What’s your financial situation?
Consider the monetary consequence should the opportunity not pan out as planned. Are you saddled with excessive overhead such as a house, credit card debt or loans? What are your obligations to your family? Making a decision that affects only you can be very different from one when a significant other and children are involved. Most importantly, do you have enough of a financial cushion to get back on your feet should the worst-case scenario come to pass? If your answer is, “Yes, I have enough to bounce back,” then you are in a much better position to go for it.
What are the market conditions?
Another step is to evaluate the current market. Obviously, in a good market, you have a better chance of getting a business off the ground quicker and greater access to funding, generally. Also, in a strong market, you can more easily jump back into your career if the venture doesn’t work out. In a down market, many people are laid off and take the opportunity to start their own business. Regardless of the conditions, you get to make the choices and not have life make them for you.
What’s the payoff?
It’s critical to do a cost-benefit analysis to determine what success would mean to you. If you take a business risk and the best you can hope for is to match your income, is that enough? It might be if it means being your own boss. What if you can make an incrementally greater amount, but it will tie you to the business 80 hours a week? What if your business takes off, and you’re forced to handle the problems of significant growth? Is that who you want to be? Many times we prepare for failure, but you need to plan for success as well. As part of your forecasting, look out three, five and 10 years to help get answers to these questions. How closely the results match your goals and desires will go a long way to helping you make your decision.
What’s your regret quotient?
So far we’ve talked about the costs of taking a business risk. There can be an even greater cost involving your regrets should you fail to take the leap. What if you have an idea, a hope or dream, and you never give it a try? How much would you be bothered by your failure to act? You know someone else is eventually going to have a similar idea, and if they turn it into a successful business, could you live with yourself for not moving forward?
What’s the worst that can happen?
In Dale Carnegie’s famous book, “How to Stop Worrying and Start Living,” he outlines a magic formula to help combat worry. I believe it applies to risk decision-making as well. It’s a simple question you ask yourself, “What’s the worst that could happen?” If at worst you end up working hard, throwing yourself into your venture, ultimately giving up and coming out financially the same or even a little worse than when you went in, it will likely still be worth it. What you will have learned and the people you’ll meet through the experience will be invaluable in helping to shape the rest of your life.
Just imagine if you’d never said, “Hello,” to your one true love. How empty would your life be?