The Campbell Academy Business Blog

On the subject of risk

To run a business is to take (and therefore manage) risks.

To open your own business is to take a huge risk because it might not work, and we know from the stats that many new businesses never make it past the 1st 36 months.

In my world, many people who are good (and profitable) dentists have an entrepreneurial 'seizure' and open a business.

Many people do this without having a great deal of experience in running a business by thinking, 'How hard can it be?' and therefore off they go. They find themselves dropping into a place where they have to decide to take one path or another to invest money here, spend money there, save money on this or blow money on that. It becomes a game of risk, assessing options and deciding where to take the chance and where to give up the opportunity to take the chance.

This is challenging for many people because most of us, on a day-to-day basis, try to manage our risk; it is ok to blow a little bit of spare cash here but not to blow up the whole bomb, so there's nothing left.

The difficulty with running a business is that often, you're left to make decisions that feel like everything counts, whether it works or not.

As your business becomes more mature, you can continue to try to manage the risks, but later, perhaps with more of a nest egg, a buffer to see things through if it gets difficult or problematic.

The problem with the big risks, the ones that can really affect you, is that they're unpredictable by their nature and, therefore, hard to predict.

What you can predict is that the risks will come, what you can predict is the events will happen, and what you can predict is that there will be a time when some or all of the money that you spent to keep the business safe will have to be spent to keep the business safe, or else you'll have to accept to not have the business anymore.

Many times throughout my career (and probably many times in my own head), I've heard the phrase, "I earned more as an associate than I do as a partner".

This reveals a mindset for someone who did not quite understand the risk they were taking and the potential rewards they were getting over the longer term by becoming a business owner.

In general terms, an associate job in dentistry is a safe haven, and certainly, in the current market, it's possible to get an associate job (that is not necessarily the case in other professional fields). For that reason, you're likely to be able to pay your mortgage and feed your family, which is a huge privilege, but take the other position, the position where you've gone into business and realised that you're getting paid less on a month by month basis than you were when you worked for someone else (in the early stages of ownership, this is almost always the case, and for some people, it's the case well into ownership).

What you are doing, though, is you're building a nest egg; you're building something that potentially has value later on, an asset that you could sell further down the line.

One of the biggest problems now, and why people take more risk, is that they can't see it. They want to have their cake today and their jam tomorrow; everybody wants all of it now and then.

This then absolutely fundamentally affects your attitude to risk and the risk you're prepared to take because one of the greatest risks to business is taking the money out of it; because once the money's out of it, it feels like yours and then when the business is in difficulty, it feels really difficult to put that back in to help it out.

5 years ago, when we opened the new practice at that stage, we could not have foreseen the circumstances we would find ourselves in. Push on 5 years' time, where we're in a much better financial position. We couldn't have seen the circumstances we find ourselves in now with a potential trade war or, in fact, an all-out economic war looming on the horizon, markets that are fluctuating in an unprecedented way and lots of people concerned about the possibility of the growth of the economy, or shrinking of the economy, or a reduction in the possibility for your business to make money.

All of that seemed to happen in a few weeks from January into April, and suddenly, the world looked different.

I guess all we can count on is that the risks will continue to come: changes in the law that we didn't expect, which exposes us to risks with our staff or employees or associates, changes in compliance that means we have to invest money to keep our practices more compliant to the regulations that emerge, changes in tax, changes in the economy, or simply just being attacked by patients or staff members who have an axe to grind.

All of these risks are part of running a business; you can manage and mitigate a risk, but you cannot eliminate a risk.