Who said knowledge is power? Running an online business demonstrates your ability to deal with risks. Businesses are often created and grown by people with variety of mindsets. Problems are shared, the knowledge is gained and shared too. But when you work for yourself, all is your responsibility and, potential risks and rewards, and the knowledge you gain through trials and failures are all your own.
The knowledge. It is like nothing else. It is a power as a result of learning experiences.
TARA (SARA) Framework
Have you ever heard of “TARA” (or “SARA“) framework in risk management? It is about four strategies for managing risks. Transfer (or Share), Avoid, Reduce or Accept.
Risk management, framework, what the hell am I talking about? OK I’ll show you a couple of examples.
You find an awesome shopping vacation package deal abroad. Flights and accommodation are cheap, everything you can buy is half the price over there. It sounds so exciting, you’d love to go.
But there are two things you’re worried about. (a) It’s a non-English speaking country and you’ve never visited before. (b) You want to shop ’til you drop as long as the luggage weight is allowed. But what if all the things you’ve bought are lost or stolen on the way?
- Transfer – you transfer the risk to someone else, i.e. by taking an insurance. If your shopping’s stolen, at least you’ll get the money back from the insurance company.
- Share – don’t go to the trip by yourself. Share the experience with your friend(s), you’re worrying about the language problem, but that will not be as scary when someone else is with you.
- Avoid – give up the idea altogether, forget the vacation. Things may be 1/2 price there, but it’s not worth travelling alone and to keep worrying all these things.
- Reduce – reduce the risk by being careful! Avoid unsafe districts. Reduce the risk by buying less. Buy only the things you desperately want. At least you’ll enjoy the experience.
- Accept – stop worrying and just go! If your suitcase is stolen, then stolen. The whole vacation experience will be worth it!
Does it makes sense a little?
Now if you apply this TARA/SARA to your new online business, it will be something like this.
You want to open an online electrical hardware store. You have a vast knowledge over electrical goods but know little about marketing. What if your business makes a loss?
- Transfer/Share – open an online store with someone with good marketing knowledge. Or start a joint venture with an expert. Then if the business makes a loss, half of the loss will be shared (“transferred”).
- Avoid – avoid the business; don’t start it at all!
- Reduce – reduce the risk by selling less items. Don’t sell goods that you’re unsure of.
- Accept – accept some level of loss. Every business experiences a failure at some point, particularly in the beginning.
So What Does TARA/SARA Tell You?
It tells you that risks can be “managed” by using this framework, but none of the options will give better assurance than others. None of them will ever be the perfect solution, you see?
- By sharing your business, the loss may be halved but the profit will be halved too.
- By avoiding the business, you’ll never have a chance of success. But you’ll never have a chance of bankruptcy either!
- By reducing the size of your business (i.e. selling less items), the scale of the business will stay small, too. You’ll just make a small profit.
- Accepting the potential loss without any plans will be a gamble!
Avoid? Give Up?
Don’t get me wrong, I’m talking about “risk assessment”. Avoid something, or give up something doesn’t mean to “ignore”. You think hard about a new challenge, and you come to the conclusion that it’s best not to do anything with it. There are some circumstances in life that the risk of losing is too big that you don’t want to take such a slim chance of rewards.
Sometimes you decide not to act on something, after the hard consideration. But the more important thing is to move on. Keep searching for something new, so that you can act on it.
When Can You Apply The Framework?
- You start your new business like the example above, or start a secondary business
- You sell your online business to someone else
- You join a new money-making scheme where you have to pay a membership fee
- You start a campaign in new social media platform
- You start advertising your Facebook campaign differently – for example more aggressively. Will it make you earn more money? Will visitors be annoyed? Might a repetitive campaign be recognised as a spam and risk of being banned by Facebook?
How Can You Apply The Framework?
Whether you should avoid the risk, reduce the risk, accept or transfer depends case by case. You can seek for experts’ advice. Or do some online research. But everyone has different strengths and weaknesses. The final decision is always up to you. You may want to rely on your gut instinct. Or it may take you a long time to make a decision.
Who Said Knowledge Is Power?
I hope I haven’t put you off – when you hear words such as “risks” “failure” and “weaknesses”. Is running an online business is so tough? No. Believe me, it’s not! Like every other business, you learn as you start your business, learn as you carry on, and learn as you succeed. What you gain from learning is a knowledge, and you will too, say knowledge is power.
The best is yet to come, but for my own part it’s all gReat to me!