Understanding And Minimizing The Risks Of Business Growth

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Risk Reward Buttons Shows Risks Or Rewards© 2013 Vinny Ribas for LeaderBridge

‘Risk tolerance’ refers to the measure of risk that a person or a company is willing and able to take in any major move they make. For example, an entrepreneur might determine that he is willing to (invest) only a certain amount of money to start a business because he would lose too much if the venture didn’t succeed. Analyzing and knowing the amount of risk you are willing to take is an extremely wise move, because it prevents you from getting in far deeper than you are comfortable with. Overstepping those boundaries can result in making desperate moves. You may also end up losing much more than you can afford to lose. It can cost you your friends, your reputation, your privacy and even your health. If you go too far over the line it can also destroy your family.

There is almost always risk involved in getting aggressive to grow your business. When you are planning out your strategies, it is essential that you do a risk analysis on yourself, on your company, and on everyone else who might be affected by your choices (employees, family, vendors, investors etc.). Here are some of the scenarios you will face, tough questions you need to ask yourself, and some possible ways to minimize the risks. It’s vital that you are brutally honest with yourself! If you’re not, you may end up losing much more than you were ever willing to risk.

Financial Impact

Depending on the way you plan on growing your business, you may need to make a financial commitment. You may have to invest in more marketing, more equipment, more employees and a lot more.

Due to these necessary investments, be aware that there may be lower or limited income and/or profits for a while. In fact there may be an extended amount of time before your income or profit rises. You need to decide how long you and your company are willing and able to make less money than you would make in a more traditional job. How much money do you need to make on an ongoing basis to justify making this your career? How does your family feel about your decisions? Is everyone willing to live a more moderate lifestyle until your investments pay off?

Here are some ways you can minimize this risk:

  • Change plans and move to a strategy that doesn’t require any or as much investment on your part (options for this will be discussed in an upcoming video).
  • Create multiple or alternative streams of income before you make your investment. That way you know your bills and salary are covered.
  • Start slowly and expand as your income and profits increase.
  • Save up first so you are not counting on your day-to-day income to finance your growth.
  • Find investors who will carry you for a short while or for an extended period of time, depending on your needs.
  • Borrow the money needed to finance your growth.
  • Rather than paying yourself according to the business’s profit, put yourself on a modest salary. That way your personal income is steady. Then, when you have a larger than usual profit, you can use that money to finance your growth.
  • Pre-sell your products or services to minimize up-front, out-of-pocket costs.
  • Lease as much as you can instead of buying if it makes sense.
  • Put some money away every month from your profits to replace and/or repair equipment.
  • Find investors to take the risk for you.
  • Put strict limits on unnecessary expenditures.

Time Investment

You may have to spend more time than you did previously, or be away from home for extended time periods. Do you get a smaller home or apartment because you won’t be spending much time there? If you have a family, or if you are in a serious relationship with someone, you need to find out how this will affect them.  Distance can put a toll on any relationship. This is no time to be selfish. Everyone needs to be on the same page.

In order to minimize this risk, you can:

  • Bring your family with you, at least once in a while.
  • Carefully plan and limit your time away from home. (e.g. – 2 weeks/month or just weekends)
  • When you’re away from home, be sure to communicate with your family every day. Schedule the time if you can, and use webcams (e.g. Skype) because it is more personal.
  • Monitor the continued acceptance and tolerance of the other people. What sounds OK in the beginning may take a toll as time goes by. Remember that they may say everything is fine because they want you to be happy, but they are actually growing more and more discontent with the arrangement.
  • Have someone house-sit or at least check up on your house or apartment.
  • Have someone you trust check in on your family.


The bigger your company gets, the more the public, possible partners, investors and the press want to know about you. As a result, you and your family may lose some or even much of your privacy. You may be asked for interviews which can, in turn, delve into your personal life. If your strategy includes blogging or being more active on social networks, you must be careful about how much you open up about your private life. And the more popular you get, the more people want to know about you.

In order to minimize the risk of losing your privacy, you can:

  • Guard your private life by never giving out personal information.
  • Be very careful about what you post online. Have someone you trust read it before you post it to ensure you’re not saying too much.
  • If you work from home, get a post office box for your mail so people don’t have your home address.
  • Never give out your cell phone number except to people you absolutely trust. If your cell is your business phone as well, use a virtual phone service that enables you to screen calls in a professional manner.
  • Make sure your family is protecting your privacy as well.

Your Reputation

As your business grows, you will garner more and more attention. Thus, your reputation is at stake all of the time. You are constantly under public scrutiny. You will need to guard your image and brand at all costs. This may require changing things that you like to do, and possibly that your family likes to do. Think about how your reputation will affect your family as well.

In order to minimize this risk, you can:

  • Make certain that your public image is the real you. That way you don’t ever have ‘fake it’.
  • Be sure that your image is not something that your family would be embarrassed about. For example, your wife may not appreciate your ‘image’ as a ‘womanizer’, even if it is just for show.
  • Be extremely careful about who you surround yourself with (your team, your clients etc.). Avoid being surrounded by people with different moral and ethical convictions than yours.
  • Be careful not to get sucked in to the wrong lifestyle. For example, you may want to avoid getting caught up into corporate events and celebrations that involve heavy drinking and even drugs.
  • You may be tempted to cheat on your spouse or significant other because you are so far from home. Or, someone else may come on to you and just make it look like you’re cheating. You don’t need someone posting a picture of that on the Internet for your family to see, regardless of how innocent it really was! Stay clear of possible temptations and situations that might be misconstrued at all costs.
  • Monitor your online presence so you know what people are saying about you. You can use a program like Google Alerts to find out every time your name or your company is mentioned online.
  • Dispel any rumors quickly! Don’t think they will just fade away on their own.

Depending on the role you are about to step into, your set of risks that must be different than these. But in any case, the point is that all of the risks should be identified, and your tolerance in each situation analyzed before you make a giant leap. The last thing you want is to discover that you’ve gotten in way over your head, even if it is in just one area. One bad risk can ruin all of the other great things you have done!

Tony Bodoh and Vinny Ribas are the co-founders of LeaderBridge. Tony is the author of the soon-to-be released book, ‘The Customer Within.’ He is a Fortune 150 consultant and the founder of Tony Bodoh International and VenuPlan. Vinny is the author of ‘CEO Secrets’ and has coached over 1000 entrepreneurs. He is also the founder of Indie Connect, an entertainment management, consulting and training company. Together, they have identified thirteen critical elements that successful businesses leverage in a specific sequence throughout each of four stages of business growth. Using these elements as the foundation, LeaderBridge offers a system of in-depth business, leadership and personal development training for business owners.


[note]proofread by CR – 11/08/13[/note]