How Important is Risk-Taking in a Startup?

Posted on March 26, 2018 by ah! Ventures

A successful entrepreneurship involves taking risks. Most people tend to avoid risks, but those who are brave enough to be risk-takers, have a competitive advantage. Risk is a situation involving exposure to danger. Which entrepreneur would want to drive his business through risk right from the initial stage? With each risk an entrepreneur takes, there is an opportunity for accelerated learning and accelerated compensation. Every startup’s founder needs to get out of comfort zone right from the beginning and take risks.

The beliefs of some people state that people who do not take business risks are responsible, cautious, concerned about their startup, deliberate and thoughtful. However, other people think of these people as the ones who are reserved, lack courage and less inspirational than others. Business risks must be seen as a cost of opportunity and then, this attitude must be validated within the organization. Risk-takers tend to climb the company’s ladder faster and make more money. If risks are not taken, an entrepreneur can never know about what better was in store for him and his company or what could have been better for them. Risk-averse people are not accustomed to change and will also, like to continue working with fading technology.

Taking risks involve practice and this leads to development of new habits. One must never keep a business going by being comfortable in their own skin. Risk-averse people may have a warped perception of themselves.

So, what are the types of risks that every entrepreneur must take?

Financial Risk

Financial risk is the risk concerned with the finance of the company. It states whether the company would be able to meet its financial obligations or not. This is considered to be one of the major concerns for businesses around the world. Every company must maintain liquidity. These potential financial risks determine the success of every business venture.

Credibility Risk

Credibility risk is the risk that entrepreneurs face whenever they are putting out a new product or service in the market. The establishment of a business is mainly dependent on the credibility of a brand name. This can be influential towards the purchasing decisions of potential customers.

Technology Risk

Technology risk refers to the losses that business owners face due to technology failures. Investing in the latest affordable and reliable technology is the only measure to reduce this risk. Technology keeps on changing and it must be adapted accordingly.

Competitive Risk

Competitive risk maybe defined as the risk of a business owner for losses due to the product, price and marketing strategy for competitors in the market. Startup companies suffer the most by this type of risk because they have to compete with companies that have already been established in the market years ago.

Market Risk

The last type of risk that companies have to face is market risk, also known as, systemic risk. It refers to the risk companies face due to fluctuations in the market. For mitigation of such risks, entrepreneurs should develop and implement various strategies.

Can you challenge yourself and handle these risks for your startup? The truth is, as long as you want to play safe- you may never find out.

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