When it comes to business, it often takes the biggest risk to make the biggest reward.
What is clear though is that risk taking is part and parcel of entrepreneurship and some of the biggest businesses on the planet took a leap to ensure success.
Of course, starting a business in itself is a risk. You have to put in capital, time and effort and there’s no guarantee it will become a success. However, there will come a point where you hit a crossroads, where there’s the safe turn to steady, small to medium sized business and the road which will drive your business forward, or potentially to the ground.
Irresponsible risk is something that few would recommend, and rightly so. But it isn’t uncommon. Incredibly, Fred Smith, CEO of FedEx, was refused a business loan in his early days and spent the company’s last $5,000 in Las Vegas, taking the ultimate risk and using it to gamble. He returned with $32,000 and kept the company afloat. He’s worth over $2billion today and the brand are one of the most recognisable on the planet.
That isn’t necessarily the type of risk that entrepreneurs should be thinking about. In fact, you’ll find far more horror stories than you will the success of Fred Smith. Entrepreneurs should be calculated in their risk and there are many reasons as to why you should take one.
Innovation is one of biggest reasons to take a calculated risk and perhaps the finest example of this is in Elon Musk.
Any move that could potentially innovate is a risk as you simply don’t know how it will be received within the marketplace.
Tesla are hugely popular and respected these days, but there was a point where they were on the verge of collapse. Back in 2008, during one of the most difficult times in the US economy, Tesla were unable to deliver its first ever car without further investment. Musk doubled down on his investment, putting his $35million wealth into the pot and it paid off.
The car sold incredibly well and Musk and the brand have gone on to innovate in many other areas too. He’s one of the best examples of people taking calculated risks in order to succeed. Of Tesla he said in a recent interview: “If you were to do a risk-adjusted rate of return estimate on various industry opportunities, I would put building rockets and cars pretty close to the bottom of the list. They would have to be the dumbest things to do.”
“I gave basically both SpaceX and Tesla from the beginning a probability of less than 10 percent likelihood to succeed.”
But succeed he did. It’s perhaps a little tongue in cheek claiming that there was a less than 10 percent chance Tesla would fail. But a risk it was and one that many can take inspiration from.
You’ll Never Know Unless You Try
Many entrepreneurs take risk just because you will never know unless you try.
Whether it be McDonalds with their first franchise or Blake Mycoskie of TOMS creating a business model that gave away a percentage of profits in order to gain bigger ones, they were moves that almost began as suck it and see.
Wayne Gretzky, the ice hockey legend once said, “You miss 100% of the shots you don’t take.” And that completely applies to business.
Opportunities will always present themselves in business, with different elements of risk. It’s synonymous with entrepreneurship and being able to analyse the risk versus reward and making the best possible decision is synonymous with the very best entrepreneurs.
How To Take Risks
Before you take any risk you should consider a number of things. First and foremost, the thought process is the most integral element of taking business risks.
Analyse the reward of the risk against your goals and ask yourself whether the risk is worth where it will place you on that ladder. Does one want to risk it all for just a few steps? Is it worth putting all your capital into a venture that has a higher element of risk but will get you to your goals in a quarter of the time?
The answer will be found in clear thought and strong decisions. It’s what the biggest entrepreneurs on the planet have mastered and the reason risk will always work hand-in-hand with the world of business.