Allow Risk to Be Your Fuel

Allow risk to be your fuel! That is some statement.

When I launched the membership club, we sold all the books for less than the purchasing price. We expected to recose the money – and more of course – through the monthly membership payments. If a new book cost 300 kroner at the local bookstore, we typically sold it for 99 kroner.

Our members saved 200 kroner per book for a monthly membership payment of 69 kroner.

✅ It was an offer that more than matched Lars Larsen’s (famous Danish business man, red.) fantastic duvet offer if you loved books!

Obviously, our strategy wasn’t popular with bookstores that couldn’t compete with our prices. But we wanted to sell the books so cheap for no one to match our prices.

By selling the books at less than the purchasing price, we were confident that no one could or would sell at lower prices than us. At least not for a long time. After all, they had nowhere else to make their money but on the books.

We had. We had the ongoing membership payments, which we experienced increasing month by month. And we could see that at some point the membership payments would more than the offset the book loss naturally generated.

Risk is a Part of the Journey

It was a very aggressive growth strategy, but when you’re running a subscription business, it usually takes a certain critical mass of members to break even and to make profit. In other words, you have to be both brave and have some liquidity in your hands when you start a membership club like the one I created. You have a lot of expenses at the beginning for marketing, salaries, location, software, etc. However, the revenue only comes later and in smaller chunks when the ongoing member deposits roll into the account. Therefore, you need to have some brass neck and be able to work with and manage risk if you want to start up a membership club of this kind.

✅ Being an entrepreneur isn’t risk-free at all, but if there’s nothing at stake, it’s not fun in my opinion either.

And if you look deeper into the risk, it’s often much smaller than it seems. In addition, you have the opportunity to actively manage and reduce risk, instead of just passively seeing worst-case scenarios and fears everywhere. I have some examples of that from my own entrepreneurial life that I want to share with you here.

Well, what If….

When I’m out sharing my entrepreneurial story, I’m regularly asked, “How did you dare sell the books so cheaply? Now imagine if all the members bought 10 books a day, you would go bankrupt in a week. Have you thought about that?”

✅ I smile when I hear comments like that. Because they testify to the fact that people – even well experienced businessmen – often let themselves be guided by the fear of what might happen in some fictional worst-case scenario.

YES, I would quickly go bankrupt if all the members bought 10 books a day for well below purchase price. BUT, why would people do that? What on earth were they going to do with all these books, though?

“But what if, say, 20% of the members bought 10 books a day” is the next question – “then you would go bankrupt, wouldn’t you?”

NO, because you should not base your business on what the individual members do, but on what the average does. And the average of your members is guaranteed to never buy 10 books a day in the real world. It may well be that some individual members buy a lot of books. But that’s just fine, because those few members will be our very best ambassadors. They will recommend us to everyone they know, because of the thousands of dollars they save. The fear has not yet been completely disarmed: “Well, if on average the members bought many more books than you expected? Then sooner or later you’d have to shut down, wouldn’t you?”

Again, NO, NO, NO, because if my calculations didn’t hold up, I could just raise the prices of the books or raise the membership price. After all, the risk is not greater!

✅ It is ME who has the final say of managing my business.

And by constantly monitoring how the business and customer behavior is evolving and being prepared to continuously adjust and optimize all parts of the business, I always have a hand in dealing with the risk and with my business.

Focus on your Dreams and Control the Fear

As an entrepreneur, I have experienced that fear rules people and businesses countless times. It’s very unfortunate, because fear is a barrier to reaching for the stars, creating something innovative and new, and aiming to live out your dreams.

When I quit my exciting and secure job, I went down to less than half pay and worked even more hours than ever before. But a number of my former colleagues said to me that they envied me that I dared to take the plunge. Several of them had even had thoughts and ideas about starting their own businesses. But they did not dare because of the obligations of having to maintain the family.

I have also met a number of business leaders who can see innovative exciting opportunities in the market, but do not dare to go for them. They fear cannibalizing their own good business. But if they don’t take advantage of the new opportunities themselves, someone else will come and do it, and seize the market. After all, the world does not stand still nor does it wait for you to get the courage to take chances.

There are also entrepreneurs who are afraid that their unique business idea will be stolen. That’s why they don’t want to share their ideas with anyone. Well, of course, it can happen that someone else takes the idea, but how likely is it? How many examples have you heard of where that has happened? And think about all the valuable guidance and feedback that you could get on your idea and your business, that could possibly put you in a stronger position. You would miss all of this because of the fear of telling others about your idea?

✅ You should not let yourself be controlled by the fear but control the fear and use it positively.

Instead of letting fear stifle dreams, it’s much more enriching and promising to focus on the dreams and opportunities and let them govern your business – and your life in general.

Use Risk as a Fuel

Risk can be very a motivating fuel – it is for me – because if there is no risk, it is no fun. It means that you did not go “all in” on your idea or that your are daring to have big dreams for your company. Or maybe that you are not challenging the market hard enough. Viborg Folkeblad (Danish newspaper, red.) once wrote an article about me, where they used the headline “The risk is my fuel”, and that’s really true.

✅ My experience after 18 years of entrepreneurship is that you don’t have to focus on worst case scenarios, because it never really happenens.

When you create a new business, you can never know with 100% certainty how the market and customers are acting. Even the best analysis or advisory board cannot give you a 100% sure certainty of this.

But you can put yourself in your customers’ shoes and use your common sense in terms of how potential customers are likely to take on your business and knowing your customer type will help you a lot. Then launch your business and strike the speculations and conjecture. Once you are in the market, you quickly build up an actual knowledge of customer preferences and behavior, which you then can act on, on an ongoing basis.

So skip the fear, use your common sense, control the risk, launch the rocket and embark on the entrepreneurial adventure.

Get all 20 Steps to a Successful Subscription Business

In my Sign Up book, I talk about how I’ve taken calculated risks myself, even though others shook their heads. In addition, you will be presented and described all the 20 steps that together create the great subscription’s business, and a step by step help on how to do it.

The Sign Up book is the sum of my 10 years of work developing, optimizing and scaling successful subscription models in more than 50 companies and is your guide and help to avoid making all the beginner mistakes so that you can create a subscription million business faster.

To learn more about how to create a succesfull subscription business, take a look at my Best Seller book. You can order it right here

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Skrevet af Andreas Dirksen

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20. June 2022

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