Risk Taking: What You Need to Know About and Why
Risk is synonymous with entrepreneurship. There are so many things you put at risk – your professional career, your earnings and your family life. But the biggest risk is risk of failure. You do a good job, you toil long hours but that does not guarantee returns. This risk of failure is something that prevents many would-be entrepreneurs from taking the leap. But unless you take the risk, you will never know the reward.
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There are risks involved at every stage in entrepreneurship. But at the end of the day you do not have any regrets. You enjoy your journey, get your highs and love the adrenalin rush you get every now and then. Even when you fail, instead of regretting it, you learn from it and move on. That is the passion and sheer possibility in entrepreneurship.
Let’s look at the various types of risks involved when you start your business.
Risk 1: Is there a customer need?
The biggest risk when starting a business is whether the customer need has been properly identified. A lot of people think that they have a great product or service. But they do not really think from the customer’s perspective. Just because you think it is a great product or service does not mean that the customer would also think that. It is imperative for the entrepreneur to realise if there is a need for the kind of business they are planning to get into. If you go wrong here, no matter how hard you try later on, it’s never going to get it right. So go ahead and conduct surveys; ask the customers if they really want your product.
Risk 2: Does it make business sense?
Suppose there is a need for the kind of product/service that you are thinking of. But does it make business sense? This is one question every budding entrepreneur should ask himself/herself.
In the dotcom era in 2000-01 every other person was launching a website on whatever product caught their fancy. VC’s and investors were investing in the dotcom businesses so nobody really cared about whether it made business sense or not. During this period, there were many websites related to supply of dog food. What these entrepreneurs failed to realise was that carting the heavy dog food cost a lot. After taking into account these charges and the discounts that needed to be given to stand out in the melee, there were hardly any profits to be made. This is what you need to watch out for. At the end of the day, do the numbers make profitable sense?
Risk 3: Business Plan- Have you done your numbers?
When Gaurav Jain and Pallavi Gupta started Mast Kalandar, they did a lot of business planning and calculations and were confident about their b-plan. But to be on the safe side, since they were not from a food and beverage industry background, they ran their business plan by a lady with a lot of experience in this industry. She told them that though they had a great business plan, they had not figured out the most vital component- how they were going to cook and plan the menu. This led to them having to redo the entire b-plan right from scratch.
The business plan is not just numbers. There are so many other parameters that you need to think about. You are never going to get it right in one go. Be iterative and keep correcting the errors that you come across. Not only will this make your b-plan better, success will also be that much nearer.
Risk 4: Do you have the right people in your team?
Do you have the right competencies in your team? Does your team share your vision? Do they have the same passion for business as you? Is the team greater than the sum of its parts? Getting the team right is an absolute must for success. So start building your team right from the start of your entrepreneurial journey
Risk 5: The Leap- Are you ready?
A question often asked by entrepreneurs is- What is the right time to take the jump and what the risk is. The answer is that there is no right time to take the leap. You do not wake up one fine morning to the revelation that today I will start the journey. When you take this jump, there will be a lot of things that will hit you out of the blue. You could have enough money, enough work experience, enough industry networking and still feel that the time is not right. You will never be ready. There are always going to be too many unknown variables in the equation. You just need to go out, start your venture and keep battling the unknowns as they come.
Risk 6: Are you willing to take challenges and learn?
When you start a business, every day the flavor of the business changes. Different levels of challenges hit you at different stages of your business. At every stage you have a new and different challenge. Are you willing to take these challenges is the big question. You should be ready to battle these challenges every day and learn from the mistakes made.
Risk 7: Money- How much and from where?
Getting into a business is facing the unknown. Whether the money is less or more is something you really cannot say. But money is important because apart from your passion it is the fuel your business needs to run on.
The initial few years are extremely tough. You are starting the business and your money is invested in the business. As you don’t get a salary in the bank every month, you need to figure out a way to pay your EMI’s and meet your personal expenses. Also, before getting into entrepreneurship you might be used to a certain lifestyle. You might have to let go of that for a few years. Student entrepreneurs will find out that it is difficult to get money for their business due to their inexperience. So money is a big risk and you need to figure out how much money you will need and where will it come from. Since you can never be comfortable with the amount of money you have, at some stage you just have to take the risk.
A ship is safest in the harbour. But that is not its purpose. An entrepreneur’s purpose is to go out, explore and start a venture. We would not have any of the great products/services we use today if somebody someday had not looked past the risks, taken the leap and ventured into entrepreneurship. Now is your chance at greatness.
This post is based on a Webinar by Mr. Gaurav Jain, CEO of the extremely popular restaurant chain Mast Kalandar. You can find a recording of the session here.