One of the major fears of starting a business is the risk involved. What would happen if you invest your money in a business, while potentially profitable, offers no certainty of success? What if the business fails?

Business is risk. There’s not one business that can provide a business owner with 100% success guarantee.

If you are hesitant or scared to start a business because of its perceived risk, I suggest you evaluate the level of risk of the business and determine whether you want to take on that risk. In the risk management field, this is called “risk appetite.” The most successful entrepreneurs are those who are able to face the risks and overcome them.

Make a list of the potential risks of the business. Understanding how the nature of your business affects risk is important in determining where to apply resources in order to help mitigate those risks. Recognizing areas of business risk will help you to optimize allocation of your resources.

For example, if you want to start a hair salon business, your risks may include (though not exhaustive):

• quality of location that you can get, which can affect your level of foot traffic and even the insurance you can get for the business
• potential for fire given the flammable nature of most hair products
• electrical safety due to the number of electrical appliances used in the business
• top hair stylists may leave, bringing with them your clients

Then indicate the level of probability that the risk will occur:

• Is the likelihood that this risk will happen HIGH?
• Is the likelihood that this risk will happen MEDIUM
• Is the likelihood that this risk will happen LOW

Finalize the list with the steps you can do to manage and minimize the risk.

This type of assessment can help you determine if the risks are well worth it — and if you have the resources, skills and knowledge to actually overcome the risks.

If you are comfortable with the level of risk, especially when compared to the returns, then invest in the business. If not, then look for a safer business for you to invest or work with someone you think is better equipped to handle the risks of the business. Or maybe consider that entrepreneurship is not for you and you may be better suited for something else.