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The calculated risks worth taking when growing your business

Posted by Todd Davison on Mar 4, 2019 3:18:00 PM

The calculated risks worth taking when growing your business

Without taking risks, you wouldn’t have a business. It’s helpful to remember that when weighing up whether to roll the dice again and attempt to grow your company.

Get it right and you’ll generate more in sales and profits. But, to get there, you’ll likely need to borrow additional funds. That’s the risk-reward balance you need to consider – and be comfortable with – before committing to growing your business.

But not all risks are created equal. It’s up to you to ensure that you’re only taking calculated risks, where a careful estimation of the possible outcomes has been undertaken. 

It’s about being brave at the right times – weighing up the risk-reward element and moving forward with speed and sureness. Remember, not taking risks can be a risk in itself. Businesses who are slow to act – or don’t act at all – are more likely to fail. Opportunities are missed, competitors gain an upper hand, and you can get over dependent on a small customer base.

Here’s how to assert some confidence into your decision-making process:

Do your research

It goes without saying, doesn’t it? But you might be surprised how often business directors make a decision without understanding all the possible implications.

As an example, Purbeck undertook a survey last year to understand business directors’ perception and awareness of personal guarantees. What we found was that UK directors genuinely believed they understood what a personal guarantee was – but previous research suggested that less than half realised that signing a personal guarantee meant they could be placing all of their personal assets at risk. 

So, any time you have a decision to make, make sure that you are aware of all the details – analyse the numbers, read the terms and conditions, and speak to the specialists. Only then can you ensure a risk is a calculated one.

Moderate risks

Once you’ve done your research, you should then set about taking steps to reduce the potential adverse effects of a decision. 

Risk mitigation strategies are designed to eliminate, reduce or control the impact of known risks intrinsic with a specified undertaking. With these strategies in place, risks can be foreseen and dealt with.

With a risk transference strategy, for instance, you could shift some or all or the risk to a third party, such as through an insurance policy or penalty clause in a contract. The risk may still occur; however, the financial impact will be somewhat displaced. 

For example, , if you are required to sign a personal guarantee to be able to borrow additional funds from a lender, you might want to consider personal guarantee insurance to moderate the risk.

As we well know, there are risks inherent in almost every major business decision. Even if you opt out of an opportunity because it seems too risky, that decision in itself can prove costly. 

Being too risk averse could lead to things like new markets not being pursued, new products not being developed or allowing competitors to gain the advantage. Therefore, it's crucial to have a detailed, research-backed strategy in place to measure and reduce risk.

 

Plus, it’ll stop you thinking of the worst every time a big decision needs to be made.

 

Purbeck offers Personal Guarantee Insurance for SME Directors who have business loans or financial agreements. We cover up to 80% of your risk, giving you peace of mind as you plan the future growth of your business. Please contact one of our specialists today to learn more on 0208 004 7252.

Topics: #pgi, #personalguarantee, #personalguaranteeinsurance, #commercial finance, #bankruptcy

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