One of the many things entrepreneurs are well-known for is their risk-taking abilities. It is believed that only those who can dare to take risks have the best running businesses. Whether you are planning to set up a small business or running a large one, taking risks is an integral part of who you are as an entrepreneur.

However, the type of risk they take is the difference between entrepreneurs who make the most of risky opportunities and those who fail with it. Risk is only beneficial to your startup to the degree that such risk is calculated. That a particular risk is calculated doesn’t always mean you will predict the end from the beginning but that you can find your way around it.

Before we examine some of the importance of risk for entrepreneurs, let’s look at some of the different types of risk that exist.

Types of Risk Entrepreneurs Take

Risks are generally classified to help entrepreneurs know what they are getting themselves into. The major categories of risks in business include:

  • Competitive risk

The business world is a very competitive one, with several other startups offering similar products and services like those provided by yours. Sometimes, you may be forced to take some risks to outperform the competition, which can go either way.

  • Credibility risk

At the early stage of a startup, you have little or no assurance that a particular audience will trust your brand, what it stands for, and the products it offers. However, if you have to wait until you have your audience’s assurance, you might never start the business.

As an entrepreneur, you have to be bold enough to start the business, trusting that along the way, your audience will resonate with your brand and appreciate the services it offers.

  • Financial risk

Not every investment you make in a business will yield the desired return you might have calculated. To be more direct, you will probably make some investments that will not yield any return. This is the cost of entrepreneurship and a risk you have to take if you want to venture down this path. There are strategies entrepreneurs can adopt to mitigate financial risk and minimize potential losses. For instance, they can utilize existing templates designed to simplify a startup profit and loss statement for Excel, as well as ensure they are keeping up to date record keeping. By accurately forecasting potential profits and losses, entrepreneurs can make better-informed decisions and effectively manage risks.

  • Market risk

There is a market entry strategy like studying the market, understanding your audience, and providing solutions to problems. There is no guarantee that your products or services will find expression in the market as much as you want them to. The decision to provide such a product or service regardless of the market is what market risk is all about.

  • Technology risk

We live in a virtual world that will require you to develop an online business for your startup. What applications will your startup need to run effectively? What business software will be required to organize things better? How can you integrate technological changes to improve your startup?

All these questions come with certain risks entrepreneurs must take if they want to start a business and succeed at it.

Why Should Entrepreneurs Take Risk?

The best way to learn is by taking risks. | Photo Credit; Pexels

Since we have established that every entrepreneur must take risks at one point or the other, the next best thing is to know why you should take one. Understanding that there is a beneficial side to taking risks will help you see it from a positive light.

Some of the major benefits of risk-taking for entrepreneurs include:

  • Risks birth innovations

The most outstanding innovations of modern history have come from individuals who dared to take risks. When they first conceived an idea, they weren’t sure how it was going to turn out. For some, there was no assurance anywhere that it would succeed. Yet, they took the risk, and today those risks have turned out to be amazing innovations.

An excellent example of a risk that birthed an innovation was the risk taken by Satoshi Nakamoto in 2009 when he created Bitcoin. At that time, he wasn’t sure whether the market would accept it. However, Bitcoin and other cryptocurrencies have now become a global innovation today.

  • Risks give the entrepreneurs the chance to learn

Reading and gleaning from the experiences of other entrepreneurs is good for you. However, the best lessons you will learn as an entrepreneur will come from the risks you take. There are things you may never know if you don’t take chances. Whether it is a financial, market, or technology risk, there is always something to learn from it.

Failure at something even after taking the risk isn’t always bad. What you do afterward is what makes all the difference. Many people took certain risks and failed at them, but they picked valuable lessons from their experiences that contributed to their success as entrepreneurs.

  • Taking risks gives you a competitive advantage 

How do you want to outperform the competition as an entrepreneur if you don’t want to do things differently? Trying to copy what others are doing to get the results can only take you a distance. If you’re going to increase the productivity level of your startup, then you must be willing to take risks.

Taking risks here means trying new things and strategies others in the same niche as your startup aren’t doing. Is there a possibility that you will fail at it? Yes, but it’s always best to see the benefits your startup stands to enjoy if you succeed at it.

  • Risk-taking helps entrepreneurs understand the market better

The marketplace is a dynamic one that changes often. A strategy that was applicable yesterday might not produce a good result today. For businesses, particularly startups, this is where innovation comes to play, and as mentioned earlier, risks are what birth innovations.

As an entrepreneur, the chances are that you may never know what works or doesn’t work in the market if you’re not confident enough to take risks by trying new things.


The more risks you can take as an entrepreneur, the higher your chances of understanding the market, having a competitive advantage, and coming up with better innovations. However, not every risk taken yields positive results, or at least not immediately. Before you take a risk, ensure to determine what type of risk it is and whether it is beneficial to your startup in the short and long term.


LifePlan: Why Entrepreneurs Should Take Risks

Investopedia: What Risks Does an Entrepreneur Face?

OperationVerve: Why Risk Taking Is Important In Business

Forbes: Why Successful Entrepreneurs Need To Be Calculated Risk Takers

Medium: The Importance of Risk in Entrepreneurship


Have you taken some risks that didn’t turn out well for your startup? Then, you’re not alone as this is the testimony of many entrepreneurs out there. For some, it’s because they don’t take risks with an understanding that such risk can be beneficial to their startup. At AbstractOps, we can help provide any clarity you need regarding risk management.

You can contact us at, and be sure we would be ready to help.




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