Is starting a business risky? If you had a chance to quit your job and start a business, would you take it? How much risk should an entrepreneur take when starting a business? Well, you will find the answers you seek below.
“To build wealth today, you must be in your own business.” – J Paul Getty
I have built businesses and I am still in the game; I have witnessed the ups and downs of entrepreneurship, so I believe I am qualified to talk about the subject of risk in business building. Now is starting or building a business risky? My answer is Yes and No.
I have had people ask me how they can start a business and succeed without risk. In reply to them, I always laugh and tell them that risk will always be a part of business. Statistics proves that nine out of every ten businesses started; fail in their first five years. This means that 90 percent of all businesses fail in their first five years. If this statistics is anything to go by, then starting a business is definitely a risky adventure.
“Starting a business is like building a ship and embarking on a voyage, armed with a plan, a map and a team. You have to sail with uncertainty against storms and unpredictable weather. If your ship sinks, it’s either you quit or you swim back to shore, build a new ship and sail again.” – Ajaero Tony Martins
I have built several successful businesses and I have also had some spectacular failures; Yet, I want to point out that starting or building a business doesn’t have to be risky. Most people shy away from starting a business because they are afraid of failing. I have had friends come up with wonderful business ideas and plans but year after year; they just sit on their ideas, waiting for the perfect time to act on it. One of the reasons why these friends of mine will never act on their ideas is because they are afraid of taking risk; they want to lose their money. To be sincere with you, I understand their fears.
“Seek advice on risk from the wealthy who still take risks, not friends who dare nothing more than a football bet.” – J Paul Getty
As at the time of writing this article, I am in the process of starting a technology company from scratch. After writing a business plan and analyzing the risk revolving around the business venture; I realized that there’s a 50 percent chance that this venture may never breakthrough. Yet, I am going ahead with the project. Why? The reason I am going ahead with starting the technology company is because of the potential reward involved.
“Experience taught me a few things. One is to listen to your gut no matter how good something sounds on paper. The second is that you are generally better off sticking with what you know and the third is that sometimes, your best investments are the ones you don’t make.” – Donald Trump
Life itself is a risk. So when I am confronted with a situation involving a certain degree of risk; I analyze such a risk in comparison with the potential reward and my risk bearing capacity. If the rewards far outweigh the risk involved and the project is within my risk bearing capacity; I will go ahead with it. Now using my proposed technology company as case study, if it fails as some of my businesses have done in the past, I will lose 100 percent of my invested capital. But if it succeeds, I stand to gain 1000 percent or more on my initial investment. In fact, if things go as plan and my team is able to weather the storm; I might make an infinite return on my investment. But remember, I still risk losing my whole capital.
“You must take risks, both with your own money or with borrowed money. Risk taking is essential to business growth.” – J Paul Getty
Business is a risk but more risky is being ignorant of the industry you are venturing into. What poses the most risk is being incompetent and lacking the necessary skills required to build a successful business. What is risky is starting a business with a poorly written plan and not being able to analyze your risk to reward ratio. What is risky is not being able to ascertain your risk bearing capacity to know how much risk you can carry?
“There are no bad business or investment opportunities. There are only bad entrepreneurs and investors.” – Rich Dad
Another point I want to emphasize is that building a business is risky; yet, it’s worth the risk because the rewards is immeasurable. Mark Zuckerberg started Facebook.com from scratch and grew it into an empire worth billions of dollars. He risked a few thousand dollars and today, he is worth more than a billion dollars. The same goes with Jeff Bezos, Larry Page, Steve Jobs, Debbi Fields, Bill Gates, Larry Ellison, Richard Branson, Aliko Dangote, Robert Kiyosaki, Donald Trump, etc. These entrepreneurs became famous and rich because they weren’t deterred by prevailing circumstances surrounding their businesses.
“In the end, you are measured not by how much you undertake but by what you finally accomplished.” – Donald Trump
In conclusion, I want to restate the fact that business is a risk but the risk can be curtailed and the reward is worth the risk. So don’t be afraid to start your own business. Instead, assess your risk bearing capacity, your competence, the upside and downside; and the possible reward. If the odds are in your favor; or you can deal with it effectively, then forge ahead with your proposed business plan and I will see you at the top.
“Without the element of uncertainty, the bringing off of even, the greatest business triumph would be dull, routine and eminently unsatisfying.” – J Paul Getty
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