As a small business, you’re likely to have fewer resources to fall back on should disaster strike. This can make you want to play it safe and avoid risks entirely. However, if you don’t take risks, you won’t grow as a business, and stagnation may be even riskier for your company in the end.
By NAOMI PHILLIPS
But not all risks are equally good. There are smart risks and foolhardy risks. So, how do you tell the difference? Read on for advice about how to make bold decisions for your small business that will lead to success.
Employ a decision-making framework
If you take a risk and it goes south, this can have disastrous effects on your company. The urge to be bold in business is not a suggestion to throw caution to the wind and simply say yes to all risks.
Whenever you have to make a big decision, it’s important to employ a decision-making framework. There are many different methods you can use. But make sure your framework helps you analyze the potential costs and benefits of a particular decision, so that you can weigh up the risk against the potential rewards.
Think of risk in terms of likelihood and effect
When analyzing the risk involved in a particular decision, it’s important to consider both likelihood of the plan failing or succeeding, and the potential consequences. A decision can be risky in that it’s likely to fail. But if the consequences of failure are not that disastrous, then it may not be too much of a risk.
If after a cost-benefit analysis you have determined that the risk of failure is high and the consequences of failure will set your company back significantly, then it’s probably best to hold off. If failure is unlikely and the consequences of failure are minimal, this is a no-brainer.
It’s those in-between situations that require more careful consideration. For example, if the likelihood of failure is small but the consequences of failure would be disastrous, or if the consequences of failure wouldn’t be that bad, but failure is pretty likely. Situations like these require you to assess your position as a company, your goals and priorities, and perhaps require wider consultation.
Know that failure is inevitable
If you understand the different risks, this will hopefully help you become more comfortable with certain types of failure. In business, not every risk pays off—some fail. As long as you can bounce back from failure, you can see it as a learning experience. This is where your understanding of different risks comes in.
It pays to get comfortable with the idea that not every risk will pay off, and that you will face some inevitable setbacks. If you fear a certain decision, try to look at that fear logically and determine whether or not it’s justified. Ask yourself what’s the worst that could happen if this plan fails? If it’s something you can bounce back from, embrace the possibility of failure and take that dive.
Going off the last point, it’s important to recognize that risk is inherent in business. If you’re not prepared to take risks, you are probably in the wrong line of work. Every decision you make carries a certain amount of risk. The important thing is to determine which risks are worth taking, as well as to have confidence in your business. If you don’t believe in your business, no-one else will either.
Be smart, but be confident, and if you struggle to actually feel it, the old adage “fake it till you make it” still applies.
Don’t decide alone
When it comes to making big decisions, it helps to elicit the input of others. Surround yourself with experts and build connections with people experienced in the industry who you can turn to for advice. Having connections with more experienced entrepreneurs is not only useful for getting advice, it’s also a smart business move.
In addition, don’t be afraid to involve your employees in the decision-making process. Of course, the final decision is yours to make, but your employees will appreciate knowing you value their opinions, and having multiple perspectives can make your analysis of the risks and rewards of a decision clearer. Even if you are sure about a decision, be open with your employees and allow them the space to ask questions or voice their concerns.
Most undertakings in business are not a simple case of making one decision and seeing if it succeeds or not. When you are considering a decision, try to imagine the various ways it might play out and what the best course of action would be in each case.
Situations are more malleable than you think, and flexibility is one of the key traits that will help you succeed. This goes back to the same issue of considering the likelihood and potential consequences of a risk. It is possible to alter a plan if it is not going the way you intended.
Recognize your emotions
Most of us are better at imagining all the ways something could go wrong than how it could go right. In fact, humans tend to exaggerate the possibility of failure when imagining the possible outcomes of a decision.
In addition, we tend to over dramatize potential consequences, when the reality is far less horrific and easier to mitigate. We need to recognize our emotions and make rational decisions based on the risks we face.
For example, if you have important documents onsite and you work with flammable chemicals, it’s not overly dramatic to feel concerned about their safety. However, you can easily mitigate this risk by opting for offsite storage, digitizing the documents, or installing a fire resistant safe. This is a rational risk response. An irrational response would be to inhibit the growth or success of your business and refuse to deal with the documents.
Don’t base your decisions on your immediate fear response. Acknowledge your fear as natural, then move on to rational analyses of risks and benefits.
Taking the right risks the right way
Taking the wrong risks in business can be disastrous. That is why careful consideration and implementing the first few tips on this list is important. However, taking the right risks is the only way you can make your business stand out from the crowd.
True success is not possible without taking risks, and it’s precisely these bold decisions that will put you head and shoulders above your competitors.