'I talk a lot about taking risks, and then I follow that up very quickly by saying, ‘Take prudent risks’ – Irene Rosenfeld
As a business owner, having moments of self-doubt comes with the territory. Taking the initial leap to start your business was challenging enough, but deciding to invest in growth presents a whole new level of risks and complexities. While scaling up can offer increased rewards, putting more on the line is stressful. With the cheerleading mantra of "you can do it" falling woefully short of answering your questions, how can you confidently navigate these important next-step decisions?
Although each business and project is different, we generally start with the below process:
What will be the impact if I don’t invest?
Because growth opportunities often have a limited lifespan, the first question you should ask yourself is, what are the consequences of choosing not to invest? Will your competitors gain an advantage? Will your business stagnate or fall behind in the market? Sometimes, the cost of inaction may outweigh the risks of moving forward. Start by clearly and logically defining what's at stake—such as lost revenue, market share, or long-term viability - if you decide to postpone or not make the investment. This applies not only to significant investments but also to staffing or other resource-based decisions.
You don't have to start with perfect.
Investing in growth doesn't have to involve taking on high levels of additional risk. Consider starting with a temporary, imperfect solution to test the waters or take that first step forward. For instance, before committing to a costly expansion, you could launch a smaller version of your plan to assess demand and refine your approach. Alternatively, instead of investing in an expensive staff member or technology resource immediately, you could outsource these needs to validate the value delivered before bringing resources in-house. While these interim steps may be messier or less profitable, they offer valuable insights and help reduce your overall risk.
Truthful worst-case scenario.
Although looking at the worst-case scenario is a well-known and broadly practiced approach, many business owners still tend to be over-optimistic in assessing the worst-case scenario for their investment. It's not only about understanding the impact of slower growth or lower profitability on your business - a truthful worst-case scenario is to quantify the impact of unexpected challenges and determine if your company can withstand them.
For example, if you have a service or product that needs regulatory approval and you know it usually takes 8 - 12 months for such a process, what will be the impact on your business if this gets delayed to 24 months? Or, what will be the impact of increased inflation, decreased customer spending and higher interest rates? Understanding your worst-case scenario isn't about being overtly cautious; it's an assessment of the impact of primarily uncontrollable factors on the overall health of your business.
What strategic counterbalances can I implement?
A diversified approach can cushion your risks. If one part of your business is stable and provides consistent cash flow, it can serve as a buffer for riskier growth investments. For instance, a core product unit or line might sustain your operations while you plan and invest in another growing business opportunity. This strategic counterbalance not only supports continued financial health but also allows you to take on more risk than other businesses are capable of.
Final thoughts.
Making growth investment decisions requires careful evaluation and a certain level of courage. Employing temporary solutions, taking calculated risks, and implementing diversified strategies can all lead to confident next steps in your investment journey. However, these are only examples of overcoming uncertainty or self-doubt when making such next-step decisions. The bottom line is that if you find yourself in such a situation, always make sure that you ask the right questions and explore ways to mitigate versus just accepting risks. If you do, it will help you make informed choices that position your business for sustainable success while maintaining a balanced perspective on risk and reward.
