Originally published on Worldhab.com
Risk is an integral part of an ambitious entrepreneur's life. Being too timid will hold your business back, but you can't afford to recklessly throw yourself into every gamble that comes your way.
For 25 years in Oneida, Gary Brewster has led an impressive career as a successful business owner in the commercial roofing industry as well as several other commercial ventures. Throughout his diverse career, Mr. Brewster developed a calculated approach to help determine which risks are worth taking, and which should be left for another day.
Below, Gary Brewster of Oneida shares six methods to improve the process of calculated risks in business:
1) Step Back and Think
You might have a great gut feeling about your latest idea, but instinct needs to be backed up with hard data. Draw up a document detailing all the facts and figures which should influence your decision. Take your time over this and include every minor detail that could conceivably be relevant.
Importantly, have someone experienced in the field review your document to make sure you've not missed anything elementary in your enthusiasm.
2) What Could Go Wrong?
Your data document may convince you that the gamble is a worthwhile one, but before going any further, you need to weigh up the downsides realistically. The hard fact is that most great ideas are at best incomplete, and many ventures fail because of this.
Try and anticipate every point of failure, however unlikely, and set out steps that would avoid or manage them.
3) Evaluate Potential Problems
If any of the potential problems you've identified seem extremely difficult or expensive to fix, then you should pause for serious thought. Even if the issue is unlikely to crop up, if it could put your entire venture in jeopardy, the potential rewards need to be correspondingly high to compensate.
And it's essential that you draw up actionable plans to mitigate these venture-threatening problems so that you can handle them with as little disruption as possible.
4) Set Out a Timetable
If your idea still looks promising, set out a timetable you'd use for implementing it. Decide on checkpoints you can use along the way to measure your progress.
Crucially, make this timetable as realistic and forgiving as possible, so your back isn't against the wall as soon as things don't go entirely to plan.
Does the idea still look worthwhile? Will pursuing it realistically bring returns soon enough to be profitable?
5) Clear the Decks
By now, you've probably decided to take the plunge and pursue your idea. However, it only makes sense to clear the business decks as much as you can before starting.
Make sure your current entrepreneurial ventures are running smoothly, and tie up all the loose ends you can think of, so you can have a clear run at your new project.
6) Have an Exit Strategy
However, before you finally commit yourself, draw up a solid exit strategy you can follow if your new venture starts to go sour.
How much money or time are you prepared to lose before deciding to end the experiment? How could you back out gracefully, closing down the venture without harming your existing business interests? Knowing when and how to quit is an essential part of managing risk.
Going through this methodical process isn't as exciting as chasing the thrill of a new idea. Nonetheless, taking this approach will put flesh on the bones of your intuition, and will help you gain a dispassionate view of your likely success.
As an entrepreneur, you'll get nowhere without taking risks. But risks without calculation could see your business sink rather than soar to the heights you're aiming for.
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