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On Taking Risks When You Are Self-Employed

managing business risk

There are More Risks When You Start Your Business

One thing I know is that risk-taking, especially financial risk-taking, occurs more often in the start-up phase of freelance business, and necessarily so. The new entrepreneur, the new business, has less to lose and more to gain by going for it and as a result, they often do.

Hopefully it works, but sometimes it doesn’t.

That is one reason why you hear about so many new small businesses failing; without a safety net, and lacking a track record, there is little room for error. If that huge first or second risk does not pay off, adios amigo.

But as a self-employed business matures, there is less need to risk big and much more to lose – equity, customers, a brand, employees – the list of what is at stake with a big risk is long, and that is also why so many small businesses top out at a certain level and never get much bigger than the middle of the comfort zone.

It’s comfortable there. So what do you do? You have to take risks if you are going to be in business, and in fact, prudent risk taking is part of the juice in the entrepreneurship game. But that word, prudent, is the one to remember.

Getting Past the Comfort Zone and Growing Your Freelance Business

Indeed, the best freelance businesses never stop risking; the difference is, they get better at it. Great entrepreneurs continue to look for opportunity and once spotted, continue to go for it. The difference is, and it is a significant one, as they grow in their business acumen, the experienced entrepreneur learns how to make risk-taking less risky.

If you want to grow your business, then do what they do: Look for opportunity and take smart, calculated, prudent risks. Don’t bet the bank on one idea (you can lose a lot of money that way.) Don’t tell the world about your big vision (you can lose a lot of face that way.) Don’t re-jigger a lot of your resources towards a new, untried idea (you can lose old business that way.)

Experienced entrepreneurs learn how to make risk-taking less risky.

Instead, consider taking a small step and seeing if it looks fruitful. Give yourself a small budget to play with and do some due diligence. Keep it on the down-low until you know it will work.

An Example of Risk-Taking and the Potential Reward for the Self-Employed

Personal example: I got a business idea about three years ago and it was one of those dang ideas that just wouldn’t leave me alone. You know the ones. But I never spent too much time with it because we never wanted to commit the time and money necessary to launch it. It seemed, well, a bit too risky. But just recently I realized there was a way to test the idea inexpensively online. So now that is what we are doing. It is still a risk, but it’s a small one to start. If it pays off, we will ramp up and take a bigger risk. There was a time where I may have started with the bigger risk, but not now, because now I see there is no need to.

Upon getting to a lake, some people like to just jump in while others like to get in slowly and get used to the water. What I am suggesting is that if you want to continue to expand your business, there is no need for an all-or-nothing approach, and plenty to be said for getting your feet wet first.

See an opportunity, take a prudent risk, start small, test, analyze, decide. That is a mature risk formula.

About Steve Strauss

Senior small business columnist at USA TODAY and author of 15 books, including The Small Business Bible, Steve is your host here at TheSelfEmployed.com.