By Pete Mosley
When you run your own creative business, you need to take decisions about risk all the time.
My aim in writing this article is to encourage you to think in simple terms about the risk/reward ratio – in other words, what you are likely to get back from the time, money and emotion you put into any specific bit of development.
I’m going to explore a number of different types of risk, and help you think about situations where risk-taking is likely to benefit you and when it might cause harm.
Taking risks with your reputation
Think carefully about getting into situations that might tarnish your reputation. Whenever you are invited to collaborate with someone creatively or financially, always check out the potential partners first. Do they deliver to a high quality and will they command the respect of your audience too? What if one of the partners fails to deliver – would that affect you by association?
Are they trustworthy – is there a way of getting an objective view or character reference?
You need to protect your reputation – people are quick to move on if they get a hint that you have a weak spot or take undue risks.
Failing to ask for help
Asking for help or taking professional advice at the appropriate time is not a sign of weakness. On the contrary, it can make the difference between success and failure. It can stop you falling foul of the law, and it can reduce the risk of making bad or naïve business decisions.
Good specialist business advice – from an accountant, or around copyright and design rights, or in relation to branding and visual identity – can often repay your investment many times over. It’s simply not sensible to try to be your own expert in all matters. At the very least, talk to people who have been down the road before you. They are usually glad to help precisely because they know from personal experience the difference a bit of well-timed advice can make.
Test your idea before spending lots of money
Test your idea – properly – before spending lots of money. Check that your product will sell and that there is a big enough pool of customers for it to sustain you over time. Create what is called a ‘minimum viable product’ – a test product that doesn’t require a big investment – and use it to gauge interest. Thereafter, every new product should be tested in the same way. This technique alone could save you a lot of wasted effort and will ensure that whatever you bring to market will be profitable.
People make a similar mistake with marketing. They assume that they can’t get started without an expensive set of marketing materials, and spend hundreds of pounds – if not more, on glossy promo materials. And then there’s the expensive websites…
Big companies test ideas relentlessly. Why should we behave differently?
It’s easy to do this nowadays and social media provides the perfect platform to pose questions, post images and ask opinions. The perfect outcome of market research is to sell products or get serious enquiries while you are still in the market research phase.
Don’t be a ‘jack of all trades’
There’s a powerful temptation to do everything yourself – especially if you can’t afford to invest much at the beginning. You print your own marketing materials, construct your own website and do your own accounting. This raises two really important issues – first, are you capable of doing these things well and second, are they in truth false economies?
If you do invest time in becoming expert in all these areas, what happens to the time you should be spending on your creative practice?
How do you cut the risks and reap the rewards?
First, you need to get your head around the risk/reward ratio in relation to each new thing you do. Will the effort, cash or emotional investment be repaid in such a way as to make it all worthwhile?
Second, you need to think clearly before making an investment – what is the minimum viable investment you can make in order to test the market – not just for your overall business idea, but for each product or service before you roll it out?
Do you need a 10 page website or could you test your idea on a blog or Facebook page first? Do you need to borrow, or could you fund a test out of cash flow initially, and then put in the money when you are more certain of a good outcome? I’m sure you can see what I mean.
Risk is unavoidable
It doesn’t matter how risk averse you are. Risk is unavoidable. Don’t lock yourself away through fear of making a mistake. Every mistake we make gets us closer to where we need to be.
Risk reaps rewards
Nothing ventured, nothing gained. We know that those who take risks tend to reap the highest rewards. The trick is not to gamble with anything that you can’t afford to lose. The cleverest people are the ones who get huge rewards from low risk enterprises. They test wisely and modestly until they are sure the idea will work, and then they roll it out, stage by stage, testing and proving as they go.
Where are you on the risk/reward continuum?
Ponder on this a while – it could help you decide the nature and extent of the risks you are prepared to take in order to move forward.
About Pete Mosley
Pete writes and blogs extensively about the business of creativity - drawing on thirty years of experience of working in the creative sector. He is business editor/expert for craft&design magazine. He delivers talks and workshops on Creativity and Business & Professional Development for universities, businesses and creative organisations. His second book The Art of Shouting Quietly – a guide to self-promotion for introverts and other quiet souls, was published spring 2015. His first book – Make Your Creativity Pay – How to earn your living from the things you love to do’, was published in July 2011.