5 Risks Every Entrepreneur Will Need to Take
Entrepreneurship is nothing without risk-taking, as it’s impossible to earn a substantial reward in the business world without an equally substantial risk taken in its pursuit. Risks are intimidating, of course, but that’s what separates the bulk of the population from the inspired, hard-working entrepreneurs who try their best to nurture an idea to success.
Some risks are optional -- not all businesses are the same, not all entrepreneurs are after the same goals, and not all situations are inevitable. Still, there are a handful of risks that every entrepreneur has to take at one point or another.
1. Losing the steady day job.
Most people get through their professional lives by banking on a single, steady, reliable source of income -- a day job. They go into work, Monday through Friday, and know they’ll get an identical paycheck every two weeks for years, or at least until they decide to leave.
Entrepreneurs have to sacrifice this in order to dedicate enough time to their ideas and personal goals. Though you won’t have to quit right away, most businesses eventually demand the sacrifice of your mainstream job. When that happens, you’ll lose the safe option of sticking with your employer for the long haul. More importantly, you’ll sacrifice a steady paycheck -- you’ll be relying on the profitability and performance of your company to pay your salary, and during the first few years, you might not have anything to show for it.
2. Tying up personal finances.
Though some businesses require more than others, all businesses need some kind of capital in order to get things moving. You might be able to acquire funding, get donations from friends and family members, and even establish a line of credit with a few banks, but you’ll almost inevitably end up putting your own money into the business as well. It could be in the form of cashing out your life savings, or something simpler like hosting the business in your own garage, but you’ll definitely need to part with some personal finances in order to sustain your business from the beginning. The unreliable paycheck makes this risk even scarier, but it will all pay off if your idea is timed and executed well.
3. Betting on a central idea.
To be an entrepreneur, you have to invest everything into a single idea -- your idea. In the daydreaming phase of planning your business, everything seems perfect, and you can easily imagine your business taking off. But you’re going to be tying up real-world, tangible assets and resources in a wager that this idea has the potential for long-term success. No matter how good your idea looks on paper, there is always the possibility that it won’t be the hit you think it will, and that means your entire business hinges on the practicality of one central idea. It’s a big risk to take but a necessary one if you want to build a business from scratch.
4. Predicting behaviors and outcomes.
Most of the departments within your business will live or die by the correctness of their predictions. Accountants must predict your cash flow to ensure enough working capital for the company, marketers must predict the buying habits of key demographics, and even operations managers must predict the correct steps necessary to build a functional product in a timely, efficient manner.
When you first start a company, you’ll have extremely limited access to data, meaning your predictions will be slightly better-researched versions of blind guesses. That’s going to leave all your departments and processes vulnerable to critical weaknesses, which could individually wreck your company’s potential.
5. Trusting your partners and teammates.
Nobody builds a business in a vacuum. You’ll rely on your investors for funding and guidance. You’ll rely on mentors for feedback and advice. You’ll rely on your partners and vendors for logistical support and insight. You’ll rely on your employees to carry out your vision. Any gap in this network of invested parties could mean a critical failure within your company, so on some level, you’re essentially putting your business in your partners’ hands. You can mitigate this risk by only working with the best, most reliable people you can find, but you can never fully eliminate the possibility that someone will leave or point you in the wrong direction.
These risks are significant, some more than others, but don’t let them intimidate you. The risk here is the risk of failure, but there’s no logical reason to fear failure. Failure is a temporary pit from which you can escape and try again. In fact, some of the most successful and widely-recognized entrepreneurs of our time only got to where they are after experiencing temporary failures in the process.
If you’re truly dedicated to being an entrepreneur, take these risks head-on -- and don’t look back.