Taking Smart risks
If you want to achieve anything in life, especially if you want extra income, you’re going to have to take some risks. The risk may come in different forms, whether the amount of time spent, the hard work you are going to put it or the extra money you will need to spend or sacrifice. But what you need to understand is that the risk will always be there at some degree, and you will need to adjust the risk at your need and within reason to be able to reach your goals.
The word risk scares away a lot of people, as it is automatically connected to “you will most probably lose money”. You see, risk is a 2 part equation, you are not risking in exchange of nothing; losing money is one thing, but winning money is another thing. When you balance out both parts, only then can you truly you if you have a winning edge.
For example, let’s say you are looking to buy an online business. The online business brings in a yearly profit of $50,000. Now usually with online businesses, the price can be anything from 6 months income to 24 months, and some want to sell their online business for 4 or 5 years of worth. Let’s say in our case the seller wants to sell it for 1 year and a half worth of income, which comes to $75,000.
Right of the bat, without even knowing anything about the business, those who are afraid of taking risks would say that you are risking $75,000 and you could possibly lose it all as anything can happen. Does it make any sense? Of course not! They don’t even know what it is all about. There are so many things to take into account.
How are the monthly returns divided? Are they stable, or does the pattern look like up and downs?
Is the business relying on a trend?
What is the business about? Are you selling electronics, furniture, sports equipment, etc…?
What is the competition like? How likely is it that a new guy can come around and take the lead?
What is the type of expenses?
There are dozens of questions like these that you can find and think about that will all help you determine if the risk you are taking is worth it. The main point is that risks should not always be attached to losing money. In the example above, by asking yourself questions, you might figure out that this business would actually have a great chance of doubling its profits within the next year as you are forecasting a great trend, something the seller did not even think about. In this case, your $75,000 could turn out to be a bargain!
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