If you’re an entrepreneur, you’re no stranger to taking risks. After all, you already took a big one when you launched your business. If you want to expand your business to the next level, you need to do more of the same.
As the saying goes: “No risk, no reward.” According to Inc., risk taking can open doors to “uncover new markets, new audiences and new capabilities.” This could translate to big dividends for small businesses, such as expansion into new territories, a broader customer base and innovative products and services. The key is to approach risk in a calculated way. Here are some tips on how to take risks to expand your product line-up—with your good sense intact.
The Upside of Taking Risks in Business
Risk taking isn’t synonymous with recklessness. In fact, the smartest risk-takers are people who approach a new challenge, such as expanding your product offering in a calculated way with eyes wide open, and not getting bogged down in analysis paralysis—the state where you overthink a situation and never decide.
Instead, successful small business owners use a more action-based method to grow their profit. Top entrepreneur school Babson College’s Entrepreneurial Thought and Action® model, what Harvard Business Review refers to as Act. Learn. Build. Repeat, offers one tried-and-true approach. This model is designed to help entrepreneurs make decisions in the face of risk.
Instead of conducting research, creating a plan, assembling resources and implementing your project, which is reasonable when the outcome is predictable, this model offers a learn-as-you-go course for growing your business. The first step is to dive in and make a move.
For instance, if your air conditioning company is considering a new type of environmentally friendly cooling system you believe customers would line up to buy, jump right in and make a limited number available. After a set period of time—perhaps a few months—step back and evaluate how your trial went. Did the units sell out? Are they collecting dust on the shelves? Did you market them to the right leads? Then, adjust your approach based on your initial results. Do you need to order more units to keep up with demand? Do you need to ramp up your marketing efforts? Do you need to train your employees more so they understand the benefits of this new product and are able to communicate them to customers?
Then, as the model goes, repeat these steps, making improvements each time.
Failure is an Option
Unfortunately, there’s no crystal ball to show us what’s on the other side of a big risk designed to grow your business. Do you take the risk and enjoy unparalleled success, or do you sink like the Titanic?
Entrepreneur Nihal Mehta, CEO and co-founder of targeted ad-tech firm LocalResponse, had high hopes when he launched his first company, buzzd, a real-time mobile city guide. By April 2010, though, he had run out of money. He was covering payroll for his employees—six, down from 20—and his co-founder jumped ship. Though those were dark days, he retooled his product and recapitalized his company, and by 2012 he had more than 30 employees, a projected a run rate of $10 million and a roster of high-profile clients.
Mehta knew that failure wasn’t the end. Rather, he viewed it as an opportunity to adapt and grow his business until he found a model that worked. If he had quit when times got tough, he wouldn’t have enjoyed the success of his new venture. In the end, not being afraid of failure kick-started his creative thought process and opened doors.
For inspiration, Harvard Business Review offers this advice for learning from failure.
Practice Makes Perfect
The more you take calculated risks to grow your business, whether it’s through new product offerings or expanded services, the more comfortable you are doing the same thing again. Each time you go through the process, you are creating a habit of reflection and continuous improvement and cultivating an environment in which you embrace risk, rather than fear it. In turn, this creates greater opportunities for growth for your small business – a win-win.
Though the idea of taking risks may give you pause, doing so in a measured fashion—and being open to learning from the bumps in the road—can be a boon for your business. Who knows? Risk done right may mean growth, new products and services and more customers than you ever dreamed of.