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Like all broad questions the answer to this one is, “it depends.”  When you started your business did you think you were taking a risk?  If you were anything like me the answer would be a resounding no.  In fact, you might have not even thought about risk.  If you’re like many other business owners all you thought about was your business idea and how excited you became every time you thought about it.

As you got a little older you may have had a little success and you would think about risk, but never believing that bad things could happen to you.  Then one day it did.  Some sort of disaster happened and risk became a very real thing in your life.

Risk is something that all business owners live with.  If you own a business you’re going to face risks.  You might have a bank loan where you are personally guaranteeing the debt.  If your business goes down the tubes, all your net worth goes with it.  You may not believe that your personal guarantee will be called, but it could if disaster strikes.  In this case you are definitely taking a risk.

You risk that people aren’t going to like your business ideas.  You risk that you hire the wrong person for your company.  You risk that all of your net worth is tied up in your business and there is a really bad recession.  You risk that people you trust steal from you.

It’s not that you take risks; it’s how you manage those risks.  Successful business owners who have been at it for years know that managing risk is part of the game.  Experienced business owners don’t take risks that can put them out of business.  Risk is a measured activity.  Sometimes things work out well and sometimes they don’t.  The important part about risk is that you learn to manage when things don’t go so well.

Whenever I hear about a business owner who is “betting the store” on a business idea I know I am hearing about someone who will eventually go out of business.  The most successful business owners would never put their business and financial life at risk.  They will measure risk, decide if it’s worth taking and then start with small experiments. 

Risk is for beginners in business.  Starting a business is risky.  New businesses have a very low success rate.  It’s very rare that a new business will still be operating as a going entity five years from now.  If your business has made it more than five years you’re in rarified air.  You’ve made it through the risky part of owning a business.

Now, the challenge becomes how do you continue growing your business without taking big risks?  You will want to take small risks.  These experiments are things that won’t put you out of business.  These experiments will not disrupt your business.  You will isolate these new ideas so they can’t leak out and ruin what you’ve spent years to build.  That is if you’re a successful business owner.

When I hear that business owners are risk takers I always say, “really?”  In my experience it’s the risk adverse business owners who last.  What group are you a part of?

We’ve put together a special report on the 7 Myths of the Private Business Owner.  Business owners as risk takers are just one of the myths.  Click on the button below to find out what the other six myths are.

Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

This article is published for residents of the United States only.  Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered.  Therefore, a response to a request for information may be delayed.  Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

Topics: for business owners, value creation, risk management

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