Higher Risk Better Results

[Jasmine]

Business experience different kinds of risks such as

Market risk

Management risk

Liquidity risk

Financial risk

Recession or market crash will pose a great risk on your business. Bad management will create a lot of risk factor in your business. Outstanding loan or funding issue will create financial risks, and when the interest rate rises due to the liquidity in the market, it will also pose a risk to your business. Therefore, there is no full proof business.

Interestingly, there is one universal truth about businesses. Higher the risk, better is the results (or profits, to be precise).

If you invested $10K, your business will be into more risk compared to a business that is financed with only $1k investment. However, you generate more profits compared to a business with lower funding.

If you are selling a product that cost you a lot of money to manufacture, your profit margin will also be higher compared to a product that does not cost much to manufacture.

 

[Mika]

Higher risk does not necessarily mean better results. If that was the case, a lot of big businesses that started with huge funds would not collaspe. If you associate risk only with the money involved, sometimes investing more results in more revenue. For example, if you have a lot of money, you can spend a lot of money to develop a lot of products, spend a lot of money on marketing, and in return generate a lot of revenue. Even though there is no guarantee that you will generate a lot of revenue, however, it is very likely that if done correctly a lot of investment will generate a lot of revenue. When a lot of money is at stake, it is of course a lot of risks. Investing $1000 is a lot risker than investing $100 because when it fails you will lose 10 times more money. Therefore, a lot of care should be taken while investing.