by Angela Delaney
A guide to taking calculated risks to grow your business
Setting up and running a business involves risk and rewards. A calculated risk balances both the pros and cons of a problem or decision and finds that, odds are, the risk is worth it. Your business will have more to gain than to lose.
However, it will be up to you as the entrepreneur or business owner to determine which solution or which decision will be the best move for your company’s future.
Why take any risk at all?
A business that stops growing is one that can stagnate or become redundant. A stationary business exposes itself to the risk of being swallowed up or overtaken by its competitors who are more willing to keep developing, experimenting and innovating in order to retain and grow their customer share.
So, in order to keep up with competitors by continuing to improve or expand their offerings to consumers, businesses must take risks. This could include developing a new product or service, or moving your company in a new direction towards a brand new market.
In this guide, we’ll show you how you can approach, understand and evaluate calculated risks to help grow your business.
1. Balance development with stability
If you want to grow your company, you first need to make sure that you don’t abandon your current healthy business practices in the pursuit of development. You will need to find a way to maintain your existing revenue model while also encouraging growth and exploring new opportunities.
Weigh up if you have the resources - time, capital, personnel - to embark on the next stage of your company’s journey. If resources are limited, hold tight until you have more room to grow.
2. Knowing where to innovate
To know what is possible for your company, keep an eye on your environment and keep tabs on what your competitors are up to. Ask how your industry is evolving, for example, are there new technologies, systems, processes or practices that are affecting, or will affect, market trends?
Make a note of topics or features that keep cropping up and consider how you can invest in or expand upon these areas.
3. Train your critical eye
Not all opportunities are created equal. If presented with a new challenge - either from within or from without - make sure you explore thoroughly all the risks that are associated with this opportunity before moving your company in this new direction.
Gather as much information as possible, speak to your peers, read up on industry opinion, elicit market research from your consumers. Select a course of action and plot out how it would develop from conception to delivery and beyond in order to evaluate all the possible outcomes.
Consider how this opportunity might fit into your company - is it compatible with your ethos, goals, values and principles? Do you have credible weight in this area to be able to offer this new service or product or will you have to build a new customer base from scratch?
Don’t forget to consider your return-on-investment: will it work financially, does it have longevity, will it expand your current revenue streams? How long will it take for this new challenge to bring in revenue?
4. Prepare for mistakes
After you’ve completed your in-depth research, it’s now time to anticipate what mistakes could occur and plan for these eventualities.
Things to ask include how your business would cope if the risk turned sour - could the company financially recover from a loss? What about missed deadlines, or loss of staff members who are involved in the new direction? What contingencies do you have in place?
If you find that the list of possible mistakes never ends, it may be time to reconsider taking the risk, or move forward with the idea in a different direction.
5. Be prepared to pivot
Once you have decided to proceed with a new service or direction, make sure you remain flexible and open-minded about where this calculated risk could take you.
Even with all the research in the world, the product or the customer may still surprise you when it comes to selling the goods. It may be adopted by a demographic you weren’t expecting, or one of its lesser features may become its most appealing.
Whatever happens, keep exploring the available options and don’t be too quick to write off your new product. Follow the path it is leading you down, and don’t waste valuable time or resources to keep it in line with your original plans.
6. Set targets to keep on track
When developing a new service, product or area of expertise, it may be long time before it starts to see a return-on-investment. So it’s important to set yourself checkpoints or mini-targets along to way to make sure you’re staying on track.
If you find you are failing to achieve your short-term goals, this feedback will provide you with invaluable insight, and enable you to make a considered decision as to whether or not it is time to try a new direction before you commit further man hours or financial investment.
7. Re-examine your processes
While it can be simpler to stick with what you know, growing a business can involve revisiting every aspect of your company’s processes with new eyes in order to discover opportunities you might be missing out on. For example, this could include switching to a new supplier or sourcing a new provider that feeds into your product or service.
Ask yourself what your current suppliers are offering you in terms of reliability, convenience, service and price. Use this information to compare and contrast with other providers in order to make an carefully considered and productive change to your business’s internal workings.
In order to grow and survive, companies must adapt, innovate and respond to the industry they exist within, anticipating market trends and keeping ahead of customer demands. And if your ambition is to become an industry disruptor and market leader, then calculated risks need to be taken.
By following guidance in this article, you’ll be in a good place to embark upon the next chapter in your company’s history.