Anyone who has ever purchased a business
or started one up from the “ground floor” knows the meaning of the word “risk”. If you have never
owned a business you cannot truly understand the meaning of business risk. Risk is the chance you take when you go into business
that you will be successful. At the onset of a business adventure, it is the missing figure that will determine on the plus
or minus side, if the investment is worth the return.
There is no such thing as a “risk-free”
business. Some businesses appear to be more risky than do others. Some businesses are even classified as low risk investments.
But there is always a risk involved in every business. This is because we live in an imperfect society, in an imperfect world,
with imperfect people.
The amount of knowledge of the business
you are about to go into will definitely help you lower the risk. Your experience in, around and adjacent to the business
you are about to go into will help you in lowering the risk also. Still, none of these advantages will eliminate the risk
involved in business completely.
Risk is managed by the decision
making process as you go into business and as perpetuate the business. Wise business decisions maintain the value of your
business so you have a business someone will want to purchase or assume when your ownership is completed or terminated. Wise
business decisions will help make the difference in the return or profit that your business yields. Still, none of these decision-making
rules is the ultimate answer to success in business. There are still the unpredictable situations and circumstances that can
change, dilute or utterly destroy the best thought through business decisions.
The risk is
always there and it can never be completely eliminated. Because there is risk, there may be failure. Because there is risk,
great success may also be experienced. Some people believe that the higher the risk, the greater the success will be if it
is obtained. However, it has yet to be proven by most business analysts that that risk is directly related to return or profit.
The risk is initiated
by some form of investment into the business. If there is no investment, there is no risk. If there is no risk, you are not
in business. Some investments are minimal in size. Other investments seem outrageously
huge compared to the potential of the business to produce.
Some investments are made
by groups of people, generally referred to as partners or stockholders. Other investments are made by individuals wanting
to assume the risk of the business all by themselves. Someone or some group or business entity has to invest in a business
in order to expect a return or profit on their investment.
Some people only invest money
into a business venture. Others only invest their time and personal effort. And some people invest other assets such as equipment
or functional knowledge. Most people going into business, no matter how large or how small the venture, invest all of the
previously mentions types of investments.
In order to perpetuate
the functioning business, it is very common and a must to continually re-invest in the business. Sometime the profits are
re-invested and other times the owner’s personal assets or equity is reinvested in the business. In some situations
both personal assets and profits are required for reinvestment needs.
The reason reinvestment is necessary
is because we live in an imperfect society, in an imperfect world with imperfect people. Things and people both deteriorate.
Restoration is needed not only for things in the business to function properly, but also so that they will appear to be in
properly condition. This may include replacing current equipment and assets that are wearing out. This may also include hiring
new people with different pay scales who have innovative and more creative ideas to enhance your business’s potential.
opposite of the deterioration issue is the constant advancement of technology. Technology is constantly changing and expanding
into new aspects of business management and production. Technology affects every business to some degree or another. For some,
technology is the constant change that cannot be kept up with, no matter how hard one tries. For others, it is an occasional
update in equipment or software that will keep them on the competitive edge with others in the same business. Sometimes the
total ability to stay in business will depend on our willingness to reinvest large sums of money into newer and greater technology
because of changes ion their particular industry or profession.
The business owner that is unwilling
to re-invest in their business will not remain in business. Some work constantly at keeping the amount of their reinvestment
as minimal as possible. While others have no qualms at all about throwing any amount of money at their business’s development,
technology and maintenance issues. Regardless of the reason, reinvestment is required.
The return or profit realized
from a business is usually what determines its overall success. If you are investing in a business, and thus assuming the
risk of that business, it is feasible to assume that some form of a return or profit is desired. Because we live in a capitalistic
and materialistic society, generally financial loss is looked at as failure.
There are not many
people that invest in a business desiring to experience a financial loss. And
if they do want to experience a financial loss, it may be because they need a loss so as to benefit them in a particular tax
situation they have become involved in. So ultimately, the investment in a business that does not produce a good return or
profit is profitable to them because of their particular situation.
Return or profit does
not always have to be measured in sums of dollars. Like the previously discussed tax situation, there are many other scenarios
that may benefit the owner with perks such as educational opportunities, a company car, fuel and insurance, personal use of
company owned technology, living quarters, and employees that multi-task in various related businesses. Some business owners
are simply glad to receive the satisfaction of breaking even instead of suffering a loss.
Business owners that suffer
unwanted loss should realize one benefit. The benefit would be to learn from mistakes and the potential problems that have
caused them to suffer little or no return for their investment. If they can learn through even their failed business adventures,
it is likely that future investments in business will produce more successful results.
is very rare that a business opportunity becomes available that has virtually no competitive entities or forces. Competitiors
may be minimally related to the type of business that we are in. They may be geographically somewhat removed from the location
of our business. But competition is inevitable for the most part.
In all actuality, competition
is good for the business investor and owner. It forces them to keep up with their business and even to seek out creative ways
to build a more viable, enduring and profitable business.
Attitudes towards competitive
businesses should be guarded closely. Angry competitors do themselves no good. There is an old saying that reads “Never
burn a bridge you may need to cross someday.” Someday you may want to sell your business and your competitor may be
the best possible purchaser. Someday your competitor may want sell their business
and you could be the best possible purchaser of it.
While you may not necessarily
want to go on vacation with your competitor, it is very wise to maintain a pleasant and healthy relationship in your business
activities and associations. Assuming a positive attitude about your competitor(s), they should always be considered and respected
as fellow colleagues. This will be the safest professional posture to assume in such relationships.
The general public discerns
when businesses are strong competitors. Critical language and strong attack advertising is usually not as attractive or affective
in drawing business away from competitors as one might think it would be. While constantly complimenting one’s competitors
will not show our own business’s strengths and abilities off that much, we must be careful to not show a negative or
even a destructive side in our communication skills when promoting our own abilities in doing business with the general public.