Businesses are delicate operations, from the largest international conglomerate to the mom-and-pop store in the corner. Sometimes they rise and fall because of the simplest of reasons. A look into the most common reasons business close down reveals the following:
- 82 percent shut down because of cash flow issues
- 42 percent discover there is an insufficient market for them
- 29 percent run out of money
These problems can be caused by or solved by making risky decisions. Risks are an inherent part of running a business, but they can also be the key to jumpstarting your success. But you need to understand how to minimize the negative impacts of risky decisions and which types of risks are worth taking.
When you want to be reasonably confident that you’ll make the right move with risky decisions, employ some methods to mitigate negative impacts.
1. Educate yourself
No matter what type of risky decision you’re planning on making, you need to understand it completely. Familiarize yourself with every aspect of decision, from its components to required processes involved. Talk to other entrepreneurs who’ve made the same type of decisions and ask them how they handled it. Knowledge will help you make the right choice.
2. Do background research
Prepare for your risk by doing extensive background research necessary. Ask the right questions and lay down the groundwork for your decision. How much will the decision cost? How much will it cost your business if it falls through? Who will be most affected by your choice if it fails? The answers may be useful in steering your business to the best decision.
3. Always have a fallback plan
Combine your knowledge on the risky decision and the results of your background research to create fallback plans in case things go sideways. Secure extra funds in case you’ll need them to bail your business out. Prepare plans for reducing operational costs in case you need to trim down. Having a fallback plan ensures your business won’t fold because of one bad choice.
Because of the inherent negative impacts of most risks, you may be hesitant to take that leap. However, there are certain risky decisions that can pay out dividends if you make the right call.
The following risky decisions can make or break your business. As with all major risky decisions, be very careful in preparing for them and always have alternatives in place to ensure you can minimize any negative impact.
1. Going All In
Sometimes your small business might need extra resources to continue operating. Or it may demand all your attention to truly thrive. Sometimes to only way to do so is to go all in, whether that means investing your savings or quitting your day job. This could lead to your business making a breakthrough thanks to your investment and hitting its stride because of your attention. Like plants or children, your small business will thrive with the proper nourishment and care.
2. Using New Technology
When you’ve done things a certain way for so long, you may start to feel too comfortable to change. However, this can lead you to ignore technology that could revolutionize your business. New equipment can be expensive investments but the advantages they offer can be well worth the price. For example, a laser cutter engraver machine may have a hefty price tag, but it can boost the production and quality of certain businesses. Research potential technological equipment thoroughly before investing in them for optimum efficiency.
3. Jumping on a Trend
Internet trends can be your business’s ticket to prosperity. Some trends draw international attention and can be obsessively followed by millions of people. But trends are notoriously ephemeral. Just take a look at the Dalgona coffee trend that took the world by storm in April 2020. The trend was everywhere on social media platform, such as Instagram and TikTok, but has largely disappeared today. Learn to look for trends that have the potential to last for years instead of flash-in-the-pan fads.
4. Hiring During Difficult Times
Circumstances may force you to consider letting employees go to keep your business afloat. The risks for laying off employees varies within each industry, but it’s almost a universal instinct of business owners to trim down on workforce when times are tough.
However, there are times when hiring a new employee during tough times may be the right choice. For example, if your business is failing because you’re understaffed and overwhelmed, a new employee may just be the thing to turn it around. Before putting out a hiring call, determine if a new employee is the right way to go.
A timid business owner is a failed businessowner. Make the necessary precautions and take a leap of faith to discover if your business has what it takes to soar.