Until now, I have not replied to him.
Over a coffee break the other day, a friend told me: “I’ve been working for 12 years now, and nothing much is happening with my career and income. I’m thinking of going into some business, but I’m afraid of the risks. Can you suggest a business that is not too risky?”
All he got from me was a forced smile.
Truth is, I didn’t know what to tell them. From my own experience and from everyone else’s I know, I have not come across a single business that is without any risk, or around any that is “not too risky.” Risk is inherent in many things we human beings do. Going into business is not the least among them.
Among many other things, one major difference between entrepreneurs and non-entrepreneurs is their perception of risk. Non-entrepreneurs see risk as something to be avoided and to worry about. Entrepreneurs recognize risk as a necessary feature of a business, and as something to manage and be prepared for.
But rather than label people as “entrepreneurial” and “non-entrepreneurial” types based on their attitude towards risk, let’s explore the influence of risk perception on people entertaining thoughts of starting a business.
The “risky-ness” of a business opportunity is influenced by one’s perception. Your perception is, in turn, influenced by your personal and family values, goals, knowledge of the business opportunity, and level of financial literacy. This is why some people are having fun exploiting a business opportunity while others find the same opportunity “too risky” and vow not to even entertain the idea.
If you tend to be risk-averse, or have been traumatized by a bad business experience (yours or someone else’s), your perception of the risk involved is likely higher than that of someone who is a risk-taker and who didn’t have that experience.
If the business opportunity is something you are less familiar with, the perceived risk is high. Besides, the true risk involved is also significant, as you could commit mistakes and go through a good number of failures before you could master — and profit from — the business. The risks could also make you give up the business after a few failures.
The risk factor is further increased if you are not financially literate. If you do not know how or do not want to read your business numbers, any business you go into will in fact be very risky.
For these reasons, it will be very difficult to convince decidedly risk-averse persons to go into business. But those who are determined to give it a try, luckily, there are means to minimize or manage the risks of starting a business.
One good starting point is to increase your knowledge of and familiarity with the business you intend to go into. If you are working in a restaurant and are dreaming of putting up one, for instance, you have the opportunity to see how the owners and managers are running it. You can ask a restaurant owner how he started and came about his business.
You can also read industry reports on your intended line of business. The business websites and the local DTI office are a good place to start your research.
Another way to reduce risk is to become financially literate. You can read personal finance books, or join organizations that develop their members’ financial intelligence. You can sit in seminars on business planning and financial management. The key is to be comfortable with business numbers.
Writing a business plan or feasibility study is for me the best way to mitigate risk in starting a business. My advice is not to put out your hard-earned savings until you are comfortably familiar with the business opportunity and are able to write a business plan or feasibility study.
Writing a business plan is like doing a rehearsal of your planned business on paper. While it may take you several hours of deep thinking and research, writing a business plan sharpens your knowledge of your intended business.
The familiarity and deeper knowledge you gain will enable you to see the potential pitfalls of your business before they could actually happen. Writing a business plan will enable you to anticipate potential problems and consciously plan contingencies. If the business opportunity proves to be unfeasible, you only incur ‘losses’ on paper.
Finally, if you ask entrepreneurs and observe them on the job, you will see that they are not exactly the risk-loving people they are being portrayed and stereotyped.
“Many of us are as risk-averse as anyone else,” said a businessman-friend. “It is because of the risk involved that we make sure we cover as much bases as possible. To go wrong in our assumptions, to get the wrong information, or to mismanage the business could lead to losses. We always think of ways to increase profit and avoid losses. In that sense, we are risk-averse.”
In short, seeing the risk makes you human, but doing something about the risk makes you an entrepreneur.
Tips on Starting a Business
If you’re thinking of starting a business, the following tips may prove useful. They are from Professor Andy Ferreria, the Dean of the Asian Center for Entrepreneurship of the Asian Institute of Management.
Tip #1: Look at what you enjoy doing. There may be a business opportunity there.
Tip #2: Look at what irritates you. A product or service that alleviates it may make money.
Tip #3: Look at what people around you are looking for. There may be enough volume to make money on.
Tip #4: Look for what gets out of stock often. There are unsatisfied demands that can be served.
Tip #5: Look at what people do not need and are willing to give away. There may be someone willing to pay for it.
Tip #6: Look at what is making money now. Ask why. There may be an opportunity to do better.
Tip #7: Look around in your neighborhood. The opportunities may be just outside your door.
(MindaViews is the opinion section of MindaNews. Alfredo “Bronx” Hebrona is president and chief executive officer of Binex Global Ventures Corporation, which does social marketing consultancy, newspaper dealership/distribution, market and development research and personal finance consultancy. You may write him at P.O. Box 46444, Gen. Santos City 9500 Philippines, or email him at [email protected])