How much are you prepared to lose?

My professional insights · Lyudmil Karaulanov · 5 min read

Published: 1 August 2026 · Version 1.0

When an opportunity excites you, it is natural to see first what might be achieved. A new market, better production, a customer you have long been trying to reach. Without this ability to imagine the future, we would find it difficult to start anything at all.

The purpose of discussing risk is not to take that desire away. It is to make it possible to pursue it without one failure taking everything else with it. That is why the question “How much are you prepared to lose?” deserves an answer while the decision is still a choice, rather than an urgent necessity.

What kind of loss do we mean?

Exceeding a project's budget and losing the production facility are different consequences. The same applies to delayed revenue, losing a key customer and a personal guarantee being called. The general assurance “I accept the risk” does not tell us which of these events you have considered.

The important questions, in my view, are what can be lost, how quickly it could happen and how far the consequences extend. Does the problem remain within the project, or affect the rest of the business? Can you end your involvement? Will you have funds and freedom left for the next decision?

Sometimes a person is prepared to write off the amount invested, but has not noticed that they have promised much more: a family asset, years of personal income or a commitment from which they will struggle to free themselves.

What can we separate and protect?

Some risks can be allocated through a contract, security or insurance. Others require activities and assets to be separated. With any instrument, however, what matters is what it actually covers. A separate company will not isolate a risk that we have brought back through guarantees.

The other party's contractual liability also has practical value only to the extent that it can be enforced. It therefore matters who is on the other side, what resources they have and how you would protect your interests in the event of default. An elegantly drafted promise of compensation is no substitute for that examination.

The moment to stop

Setting a limit is hardest after we have invested time, money and hope. The next expense can easily begin to look like the final effort needed.

That is why I believe the total investment, the permissible budget overrun, the size of personal guarantees and the events that trigger a project review are best defined in advance. This does not oblige you to stop at every difficulty. It gives you a reason to make a fresh, deliberate decision, rather than allow a series of small payments to alter your original commitment unnoticed.

Convenient dependencies also deserve attention

One major customer may have helped you grow. One bank may have been a reliable partner for years. One specialist may understand the work better than anyone else. There is no reason to reject these relationships automatically.

But it is worth knowing what happens if one of them temporarily stops working. How much revenue, financing or knowledge is concentrated in one place? Which properties are exposed to operating liabilities? Are there personal guarantees for an activity over which you no longer have the same control?

This also reveals the risk that does not arrive with the new project, but has already accumulated around it.

Where is the point of instability?

What this concept means →

For me, it is where the desired profit is specific, while the possible loss remains a vague idea. Someone may sincerely believe they are being courageous when they do not yet know how far their commitment extends.

The purpose of preparation is to preserve your freedom to undertake new ventures. When you know what you are putting at risk and what you want to keep protected, you can agree with greater confidence. Or decline an opportunity that looks attractive but demands more than you are prepared to stake.

This material is of a general analytical nature and does not constitute individual legal, tax, financial or investment advice.