Online Business Risks 101
Author info: This is a guest post by Alan Johnson, the author of The Online Business Handbook.
So you want to be successful as an online entrepreneur, but how committed to reaching your goals are you? A lot of people brag about their goals and the confidence they have in themselves, yet are not willing to take any kind of risks. Is that attitude going to get them anywhere?
Of course not, and the reasons are more than obvious. Take any successful person, analyze his or her life story and you will notice that each and every one of them have been in a position where taking risks was in order and guess what, that’s exactly what they did.
Competition is fierce nowadays and you can never get on top if you play it too safe. If you are serious about maximizing results then taking risks is definitely a must. I’m not referring to foolish risks and I’m clearly not expecting you to put everything on the line when the chances of things working out in your favor are slim to none. Taking calculated risks is the name of the game.
In the end, it’s all about risk vs. reward. Let’s take an example and assume that you have a $10k advertising budget and are running a PayPerClick campaign where, for every $100 you invest, you receive $120 in sales. Assuming that a close online contact who has promoted a similar product tells you about an advertising opportunity (an ad spot on a website which costs $1000 per month) thanks to which he has experienced better conversions ($200 worth of sales for every $100 invested), what would you do?
Conservative entrepreneurs would most likely stay away, since they have no past experience as far as advertising on that website is concerned, even if the person who has shared the information is trustworthy. A wise one, however, would analyze the risk vs. reward ratio, and here’s how things stand:
With his current PayPerClick campaign, he is earning $20 worth of profits for every $100 invested, while he could be earning 5 times more in terms of profits if the advertising opportunity mentioned by the close online contact works out (being a wise entrepreneur also means that you accept the fact that things might not work out as planned). The $1k represents 10% of his advertising budget, and, based on his information, he could be earning 5 times more in terms of profits. Definitely a risk vs. reward ratio worth taking advantage of because he wouldn’t be putting his entire budget at risk, while the conversions the online contact has experienced are definitely tempting.
A foolish risk, for example, would have been investing over 50% of his budget based on some information he has read online, from a source which can’t really be trusted. But in this case, the risk vs. reward ratio was good enough in order to justify a calculated risk on his or her part.
As an online entrepreneur, you will be confronted with all sorts of similar scenarios and, while foolishly putting everything on the line is out of the questions, taking calculated risks is a must if you are serious about maximizing results.
Best wishes,
Alan Johnson
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By Vista Sidebar Gadgets on Mar 26, 2008
Risk vs Reward analysis is the name of the game for business in general, and that also applies online.
It’s also about ROI. Especially in the beginning stages, people might not have a lot of capital to invest for ads or promotion, so they must consider where they can get the best ROI.
By PS3 on Mar 27, 2008
Nice post Alan, I seem to be finding more and more of your articles around and about.
I work with business failures and take my hat off to people who are willing to take a risk. Some of the best business people I see have had failures and learnt from their mistakes. Most have had huge rewards along the way.
It is such a difficult balance, that’s why a lot of use prefer to work for someone else and let them take the risk!
By SEO Snyman on Mar 27, 2008
Any business has an element of risk attached, whether online or in the real world. Thanks for reminding us about this fact, as far too many people lament their lack of success, whilst remaining unwilling to actually take the plunge!
By Alan Johnson on Mar 27, 2008
Hi there and thanks for your comments, glad you found my guest post useful :)
Best wishes,
Alan Johnson
By Marketing Man on Apr 13, 2008
Any business owner knows that marketing a business always involves a certain risk. At least with on-line it is trackable.
So you take the risk and it works then great and if it does not, well then you wont do it again, its a calculated measurable risk.
By Marketing Man on Apr 13, 2008
Hi Alan
Great Post.
Any business owner knows that marketing a business always involves a certain risk. At least with on-line it is trackable.
So you take the risk and it works then great and if it does not, well then you wont do it again, its a calculated measurable risk.
By Marketing Man on Apr 13, 2008
Great post Alan
Calculated risks is something we all take on a daily basis in business and personal.
When trying out new advertising there will always be a risk. As long as those particular businesses are tracking all the leads to determine if that particular advertising medium works. And if it does, well then continue to invest until it works no more.