Prudent Growth
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Prudent Growth

Q: We hear so much about taking a risk in business, but I have found that risk-taking is over-rated. A smart, savvy small business owner usually is not a big financial risk taker. We are actually a fairly conservative lot, so please use your bully pulpit Steve to help set people straight. Thanks in advance. - James

A: One thing I have noticed over the years is that risk-taking, especially financial risk-taking, occurs more in the start-up phase of business, and necessarily so. The new entrepreneur, the new business, has less to lose and more to gain by going for it and as a result, they often do.

Sometimes it works, sometimes it doesn’t.

That is one reason why you hear about so many new small businesses failing; without a safety net, and lacking a track record, there is little room for error. If that huge first or second risk does not pay off, adios amigo.

But as you note, as a business matures, there is less need to risk and much more to lose – equity, customers, a brand, employees – the list of what is at stake with a big business risk is long, and that is also why so many small businesses top out at a certain level and never get much bigger than the middle of the comfort zone.

It’s comfortable there.

But from where I stand, the best small businesses never stop risking; the difference is, they get better at it. Great entrepreneurs continue to look for opportunity and once spotted, continue to go for it. The difference is, and it is a significant one, as they grow in their business acumen, the experienced entrepreneur learns how to make risk-taking less risky.

If you want to grow your business next year, then do what they do: Look for opportunity and take smart, calculated, prudent risks. Don’t bet the bank on one idea (you can lose a lot of money that way.) Don’t tell the world about your big vision (you can lose a lot of face that way.) Don’t re-jigger a lot of your resources towards a new, untried idea (you can lose old business that way.)

Instead, consider taking a small step and seeing if it looks fruitful. Give yourself a small budget to play with and do some due diligence. Keep it on the down-low until you know it will work.

Personal example: I got a business idea about three years ago and it was one of those dang ideas that just wouldn’t leave me alone. You know the ones. But I never moved forward with it because we never wanted to commit the time and money necessary to launch it. It seemed, well, a bit too risky. But just recently I realized there was a way to test the idea inexpensively online. So now that is what we are doing. It is still a risk, but it’s a small one to start. If it pays off, we will ramp up and take a bigger risk. There was a time where I may have started with the bigger risk, but not now, because now I see there is no need to.

See an opportunity, take a prudent risk, start small, test, analyze, decide. That is a mature risk formula.

Upon getting to a lake, some people like to just jump in while others like to get in slowly and get used to the water. What I am suggesting is that if you want to continue to expand your business, there is no need for an all-or-nothing approach, and plenty to be said for getting your feet wet first.

Today’s tip: “The reasonable man adapts himself to the conditions that surround him. The unreasonable man adapts surrounding conditions to himself. Therefore, all progress depends on the unreasonable man.” - George Bernard Shaw

© 2010 Steven D. Strauss, www.MrAllBiz.com