Predicting Expenses - part 4

Understanding Risk

In any form of business there will always be risks you will have to take. Whether it be to make a certain investment, or to promote an employee to manager. The hard part is not knowing whether or not you are making the correct decision.

When you first started your business, you were taking one big risk. You didn't know if you were going to go bankrupt, or prosper in wealth. But the chance that you might succeed existed. For that reason you established the company, and worked your hardest. It is important not to dwell too much on the bad consequences that may occur while taking a risk. This will only slow one down. Taking chances and feeling positive about them is key.

If things do not turn out the way they were planned, do not fuss. Make the best of the situation. Be prepared for things not always going perfectly, so you are not surprised when a plan fails. Handling situations in a calm and organized manner will get you the farthest. Being stressed, angry, and confused will get a person no where.

Take a look at the two following people in the following scenario. Decide which person handled the situation best:

Bob wanted to help his jewelry business grow by investing some money into advertising. He contacted a jewelery magazine, and bought 5 full pages to place his ads on. Before purchasing the ad space, Bob did not monitor his sales very well. He spent a very large amount of money for the advertising, and afterwards he didn't even know if it had helped. In the end Bob felt frusterated and felt he had thrown out a large sum of funds for nothing.

Dave was also in the jewelry business, and interested in advertising. He wanted to see how well and efficiently it would help his company. For the past 6 months Dave had been monitoring his sales closely. He then contacted a jewelry magazine, and purchased 1 page for advertising. During and after the campaign, Dave kept close track of sales. He felt happy when he found out his investment had paid off.

In the above example you read about two businessman dealing with their ad campaigns. Hopefully you came to the conclusion that Dave handled the situation in a much better fashion. He was organized, prepared, and successful. Bob jumped into a situation he was not too familiar with. When Bob found out he didn't know what he was doing, Bob became stressed and did not handle the situation properly.

Keep in mind that risks can either greatly help you, or greatly harm you. It is the positive that we strive for and hope to obtain. The bigger mistake people make is not taking risks at all. This limits the way a business can expand and grow. But be cautious that too much risk-taking with little experience can be bad. With a great understanding of risk, you can make the proper decisions.

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