The article "How Much Risk is Necessary to Grow Your Business?" talks about entrepreneurialism, it has been written by Vishal P. Rao.
A business owner is thoroughly responsible for their own financial survival and possibly the financial survival of their epmloyees. Business owners, for the most part, seem to be "risk takers", who really don't easily "go with the flow". They are inventive and somewhat confident, as just having their own business does mandate that they possess these qualities.However, the ability to live with risk is really much a personal issue. Some business owners can live with more risk than otehrs and can manage the risk better than others.Having the ability to effectively manage risk is imperative for a successful business venture. Therefore business owners need to be able to effectively judge how much risk is "acceptable" and which business ventures are inherently "too risky" and therefore perhaps harmful to the business overall.While all businesses must grow and change continually in order to survive, every time a business makes a decision to expand or increase its offerings, a modicum of risk does exsit. Most businesses face rsiks when they incorporate new offerings into their current ones, take on new employees, when they change their marketing techniques sufficiently, or when they expand into new areas of business above and beyond the general core or "parent" business.Each time a new project, venture or offering is added to a business, "risk containment" should be employed.
It is never possible to eliminate all risks completely, but containing risks to an acceptable level will enhance the experience and keep the overall losses at an acceptable level, if fialure of the new venture or offering does occur.Business owners need to assess the risk using the following principles:1. Is that risk necessary for the fruther development of the business? If so, why? 2.
Is that risk attainbale for the business? If so, why?3. Is that risk affrodable for the business? If not, then it shouldn't be done.
A strict, realistic assessment of funds available and a budget should be worked out before a business embarks on any type of expansion or addiiton to its present offerings.4. Is the "timing" right for the new addition or venture? Many times, if a business is experiencing a downward cycle or other financially stressful barriers, expansions or additions are best left for a second period in the life of a business.Many business owners make one of two serious mistakes: they either refuse to gamble at all, and don't therefore grow their business appropriately, or they gamble too much, exposing their business to such a high degree of risk that eventually the business finds itself in financial difficulties.Example A: John has owned his own print shop for several decades, during which time he has enjoyed much success. The newset technologies, though, could increase John's clientele and the speed at which he delivers his goods to existing clients. John, though, is thoroughly risk aversive, concerned abuot the expense of expenditures that would follow incorporation of the latest technologies, and therefore, John does not incorporate them. As a result, he has lost existing clients and many times fails to add new ones, effectively hurting his bottom line.Example B: Miriam owns her own real estate company and does really well with it, employing ten human being. Miriam feels the need for new challenges however, and deicdes to buy several investment houses herself. The houses she buys are extrmeely expensive, and need much upkeep. In order to purchase them, Miriam borrows "against" her existing business, using that as collateral for the loans she must acquire.
Within mere months, Miriam experiecnes several major repairs needed on each of the newly acquired buildings. She then must borrow yet again to afford these, and finds herself going deeper and deeper into debt. It becomes a struggle finally, to even "hold onto" the original business, as she at that moment owes enormously to several creditors.As you can see, John, is much too risk aversive, while Miriam failed to take into consiedration the many difficulties that could occur with large-scale expansion of that sort.
Neither is correct in their assessment or approach to risk management and each has hurt their own businesses as a result.The old adage, "Slow but steady, wins the race" really applies significantly to business and appropriate risk management wtihin a business. Business owners should plan thoroughly and weigh their risks completely before proceeding with any new venture or expansion. However, businesses also need "planned growth" throughout given periods.Business owners need to use their judgment wsiely at all times, and use it well, when considering appropriate risk management techniques.Vishal P.
Rao is the owner of: http://www.Work-at-home-forum.Com/
An online community of human benig who work at home.
|
