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Risk is part and parcel of running a business, and how you approach and handle the pressures of risk can make all the difference to the success of your business. For some entrepreneurs the fear of failure impacts their ability to take necessary risks. For others, the risk of not moving fast enough is greater than the risk of deciding not to take up a potentially valuable opportunity.
Virgin founder Richard Branson’s risk-taking exploits are the stuff of legend. Not surprisingly his advice would always be to take risks and not to avoid them. “If you allow the fear of failure to become a barrier you’re already putting road blocks in your way,” he says. “Entrepreneurs take risks by attempting to change the status quo.”
And risk has been a constant throughout Virgin’s history, from the sale of Virgin Records to ensure financial security for Virgin Atlantic during some tough times, to the decision to the launch Virgin Galactic.
“Fear of failure has never meant us shying away from those tough decisions,” he says. “Risky decisions require bravery but also courage to stand up and face harsh truths when they don’t go quite the way you’ve planned. I’m not saying be reckless; make sure your risks are calculated, that you manage the downside and there is reason to your decision making, but as I’ve always said, no one ever reached for the stars from the comfort of their couch!”
Attitudes to risk also change over time with increased life experience and business growth, as James Douglas discovered. Six years ago the Leeds-based entrepreneur sold a successful property business to take the plunge and co-found Red’s True Barbecue, a chain of American-style smokehouse restaurants.
He says: “When we had just one restaurant I could be bolder and do a lot of things that I can’t do now with a national chain, an established brand and shareholders who I have to listen to. But I think the parameters around risk also change over time. What was risky five years ago, might now be disastrous, or par for the course.”
Douglas’s attitude to risk was shaped early in his life, as he explains: “As a young kid my family was among the haves rather than the ‘have-nots. All that changed when my dad lost his business. That experience taught me to be sure that what I wanted was always within my control to get; my first lesson in mitigating risk.”
He insists that the right mindset is crucial to approaching risk. “If all I thought about were the negative things that might happen, I’d never do the things I want to do,” says Douglas. “With experience, risks become more calculated. I avoid making rash judgement calls, but my mantra is still ‘what’s the worst that can happen?’”
Arguably one of the biggest risks in business is giving up a secure job to go it alone as an entrepreneur. When Keith McNiven quit his job in social care to start his own fitness company Right Path Fitness he insists he did it with his eyes wide open.
He says: “I took a calculated risk to start a business with nothing but a few thousand pounds in savings and no guaranteed income for the foreseeable future.”
Even so, he admits to having concerns about whether he would make enough money. “I didn’t know how if I’d even get any clients, but I was confident that that the solo route was for me and took a chance at it,” he says.
For the first few months he worked at a gym that offered him free training space to work with his own clients, in exchange for a few hours’ unpaid work with theirs. But it wasn’t what he wanted so instead he rented space on a freelance basis, another risk, as the cost impacted his already dwindling assets. However he refused to quit, and within a few months business started to pick up. McNiven is now planning to open his own studio.
He says: “I have poured my life savings into it, and I could end up in debt, with a failing business, but I believe in a positive mindset. As they say, ‘no risk, no reward’, but getting your affairs in order first is highly recommended.”
Lending platform Divido was founded by its CEO Christer Holloman and his two friends who in 2014 quit their jobs and gave themselves a year to get the business up and running. Nine months and 50 investor rejections later they were questioning the risk they’d taken. On the verge of admitting defeat, an investor came forward who was prepared to take a leap, and the Divido team ended up with double the investment they’d been looking for.
Before that the business had benefitted from having three co-founders pooling their savings to sustain the business financially. None of them took a salary in the first year and when they had company-specific expenses they took turns to pay for them.
Holloman says: “The pressure of risk is always the elephant in the room and to alleviate some of this, I paid for unemployment insurance for the first two years. I cancelled it the minute we reached the point when I felt it wasn’t a question of if but when we would succeed.”
Family support also helped make those tough early decisions feel less risky. He says: “When I left home some 20 years ago my mother told me there would always be a room waiting for me if I wanted it. That helped me be more bullish about taking risks because in the worst-case scenario, I could always go home and start again, and again.”
Divido is currently on target to process $1 billion worth of credit applications in 2019.
December 21, 2018 at 10:07AM
Forbes – Entrepreneurs