Although starting a business requires you to take risks, a good entrepreneur knows how to minimize its effects.
Although I was not the best law student, the fact that I knew how to write well, was bigger than most of my classmates and had some experience in the real world, made me get one of the best jobs after graduating.
But that dream job soon became bitter when I realized that they were not paying me enough for everything I did. The hours were long and the work was very demanding. It did not take long for me to start dreaming about quitting that job and starting my own firm.
Doing that is easier said than done. How do you do to leave the security of a job and salary for the uncertainty of a new business? The potential dangers seemed too great, it was when I remembered the words that a wise entrepreneur once told me:
“An entrepreneur is a person willing to take a risk with money to make money.”
He was absolutely right, the risk was part of the game. There was no other way. Try new ideas, open a new store, launch a new product, everything involves a risk. Maybe the first thing you should ask is whether taking them is part of your DNA.
Risks: the good, the bad and the heartbreaking
How can we know the difference? After all, with great risks come great rewards .
In a way it is visceral, you know that you have a great risk when you look at it head on. In his book Blink , Malcolm Gladwell says that the reactions of your instinct are the best because your subconscious takes all the information available and records immediate reliable answers. In other words, if you find yourself waking up in the middle of the night worrying about something, it may be true that this is a risk that you want to avoid in the future.
With all due respect to Gladwell, risk connoisseurs use both the left side of their brain and the right side. The instincts are good, but they can not replace the typical logical analysis.
When you analyze a business risk, consider:
- The growth potential. You’re taking a risk to get ahead, so you should start with what can work if it works. The problem is that this is where the analysis stops because the perceived results are so tempting that people freeze. Do not make that mistake.
- The worst case. One way in which entrepreneurs know the risks is through experience, making mistakes. These happen in business too. It’s your job to make sure no mistake ruins your business.
The last part of the equation to become an entrepreneur and knowledgeable about risks is that, before taking risks, smart entrepreneurs put in place mechanisms to ensure that their exposure is never so great.
- Insurance. What is it for? To reduce the risk. Not being properly insured is bad for the business.
- Incorporation. Any person in a small business who wants to be a connoisseur of risks will have incorporated their business. Corporate shields protect your personal assets from the risks and mistakes of the business.
- Written contracts. People remember different things. Sometimes they do not remember anything or incorrectly on purpose. A written contract is your protection against all these inevitable incidents.