Do you know the PepperTap story?
It was founded in 2014 in Gurgaon and was one of the first online grocery shopping apps. They tied up with local stores and ran on zero inventory model. It looks good, right?
But they invested a plenty of money very promptly and ran on a freebie model to obtain customer loyalty. Having used it myself, I was pretty content with the service. They also gave free cloth bags (not polythene) with every order, and I used those to pick up other things from the market. No one else was giving anything at that time. But then, after 3-4 months, I suddenly saw that the app was not allowing me to order continuously for several days. Later, I found peppertap has stopped its operation. I was unhappy because a good service with freebies was an attractive model.
What went wrong?
They expanded too fast without analyzing the risks. They didn’t measure their Risk Appetite, and even after getting funded by investors, they had to shut down operations.
The ability to measure Risk Appetite comes with experience, and that is why it is very necessary to have advice or guidance from an expert in such topics.
But, what is Risk and Risk Appetite?
A risk is the probability for your business to face problems.
It requires an action to prevent a problem.
And a problem requires an action to control the damage that has already happened.
Decide for yourself which is better for your business: managing risks or problems?
Let’s now talk about Risk Appetite.
It’s like knowing how much rice or chapati you can eat in a day without disturbing your digestion.Or whether you can eat the fried sugar ball daily or not?
Similarly, risk appetite is a measure of how much risk you can manage to take so that it doesn’t upset your business goals.
Failure to measure risk appetite is one of the major reasons 90% of startups have to pull down their shutters. Business owners get excited by short term favorable scenarios and invest big money, hire lots of people, offer unlimited freebies, but when the market correction happens, they cannot survive in the actual equilibrium of the market. Don’t be overwhelmed by the unusual and short-term favorable market.
The way to do that is to measure in numbers how much risk you can take.
If you have not done yet, then measure your risk appetite now.
This post is a part of Blogchatter A-Z Challenge- #blogchatterA2Z. Check out my A-Z Challenge theme, or read previous posts.
