This is one of the most accurate of the Ferengi Rules of Acquisition. We discussed this rule once before but there is so much a business owner can learn from this one rule we thought we’d revisit it.
Taking a risk should always lead to a reward; in reality though, we all know that is not always the case. Too often, many business owners jump into a risky situation with their eyes shut, hoping it will come out in better the end. Sometimes, this is actually a good thing, marriage and having children would never happen if we didn’t take some risk, close our eyes and go for it. Nobody would win a sweepstakes jackpot if we never filled out an entry form.
When it comes to money and business projects though, going in blind is never a good idea. When a new project or goal comes to our attention, it is often pursued without finding out what the real risks are. I see this often with people getting into Multi-Level Marketing businesses, starting a new product line or even purchasing stock. We often follow the advice of someone that ‘ought to know what they are talking about’, and never look at the numbers or evaluate the risk ourselves.
The key to managing risk is to determine what the potential really is. Sometimes the gain is not big enough to warrant the risk, on the other hand without risk we never have advancements such as flying in an airplane or even walking on the moon. In both cases the potential was enormous, but that couldn’t be determined at the time it was pursued.
Usually though, there are ways to determine if the risk will come with a big enough gain to warrant taking it on. This is especially true in business and the stock market. Using ratios, cost analysis, trends and even future value tables, you can determine if a gain or loss is likely in your future. These are not always accurate, if they were, no one would ever lose money on the stock market or make a bad business decision. But most of those risky decisions could have been avoided simply by running the numbers in the first place. Most of the formulas to do this kind of analysis are readily available in spreadsheet software as part of the program or as a free templates. Run the numbers before you jump at least then you will know if the fire is worth the risk or if the frying pan is a safer bet.