Minimize Your Risk and Maximize Your Reward

Risk! © by junkmonkey

Starting a business of any sort is risky.  An online business should be less risky as the associated startup costs are typically lower than a conventional business.  However there is still risk involved.  So what kinds of things can you do to manage your risk?

  1. Take intelligent risks.  If you’re going to take a risk, be smart about it.  If you have a product that you’re able to sell boat loads of, then it’s smart to increase your inventory in it.  It would be less smart to increase your inventory in a new product whose success you’re not sure of yet.  Treat the process like driving a car – you can speed up on highways where it’s safe to do so.  But slow down at intersections and school zones where it’s less safe.
  2. Measure upside.  Look for risks that have limited downside versus unlimited upside.  Stay away from the opposite scenario.  Drunk driving is an example of a risk with limited upside (there are several other ways to get you home safely) versus unlimited downside (injury, loss of life, jail time, loss of reputation etc. etc. etc.).
  3. Learn from your experience.  Mistakes are going to happen.  Some will be more costly than others.  That’s a part of doing business, but make sure you learn from them so you’re not making the same mistakes repeatedly.  If you’re not getting the results you want, is there something different that you could be doing?
  4. Get creative.  Are there other ways to handle the situation that could be less risky? Can you hire interns or use volunteers, instead of hiring employees?  Can you take a red paperclip and turn it into a house?
  5. Work your way up.  Start with smaller risks.  Use the pay offs to invest back into bigger risks.  I started with a small website, learned the process and then turned it into something much bigger.  My first mobile app was also quite simple.  My latest apps are much more complex.  It wouldn’t have turned out so well if I hadn’t gone through due process.

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