” Often the difference between a successful person and a failure is not one has better abilities or ideas, but the courage that one has to bet on one’s ideas, to take a calculated risk and to act.” ~ Andre Malraux
Are all entrepreneurs risk takers? I think this is a fascinating question. Entrepreneurship is typically tied to risk-taking – defining individuals that go against the grain to bring their ventures to life. The Oxford dictionary states that an entrepreneur is ‘a person who sets up a business or businesses, taking on financial risks in the hope of profit.’ Alternatively, Investopedia defines an entrepreneur as ‘an individual who creates a new business, bearing most of the risks and enjoying most of the rewards.’ Both these definitions incorporate risk to differentiate the entrepreneur from the typical business person.
Starting the business requires significant risk, though entrepreneurs become risk averse once the company begins to grow. With heavy financial, time, and mental investment, the fear of loss becomes very real. The entrepreneurial venture needs to attain success and become profitable, and this leads many entrepreneurs to choose to play safe rather than taking risks.
Although this may work for a brief period, soon, growth slows down, while the business’s motivation and inspiration begin to dwindle. Entrepreneurs begin to panic, which could lead to risks that are not properly thought through to get back to glory.
I believe that entrepreneurs should take calculated risks consistently and focus on continuous reinvention to maintain ongoing growth. Risk should form a part of the planning process to explore ideas that will help the business meet challenging but realistic goals.
‘It is absolutely essential to take risk in order to achieve great things. In fact, you can bet that everyone who’s achieved anything truly great took a calculated risk to get there.’ Steve O’Dell
How can an entrepreneur become more comfortable with taking risk?
The last thing that you should do when things are going well is sit back and avoid taking risks. When things are not going well, you cannot panic and freeze, or try hoarding your resources. In both positive and negative scenarios, you can still make calculated decisions and take risks that will move you forward. Here are a few things that you need to know about taking risks: –
Risk drives innovation
For you to innovate, there needs to be an element of risk. If you have concerns about taking a big risk, take time with your team to do a risk assessment. This will allow you to consider the different scenarios and outcomes to decide which option would be best for you as you move forward.
Define your risk tolerance
There are different types of risks that you can take. This includes small and big risks, calculable risks, ambiguous risk, and even unknown risk. Taking risk does not mean that you put everything on the line. You can begin with small risks, and as you see the results, upscale your risk level.
Peek at your competition
You will quickly find that risk can differentiate you significantly from the competition. Evaluate what the competition is doing and observe their gaps. Choose to do something different and fill in these gaps, and you will reap the benefits from the target market. When you get an idea, remember, it is only a matter of time before someone else thinks up the same thing and chooses to act. Better for you to act first and be a market leader.
As an entrepreneur, remember that you are already familiar with risk as you have taken the necessary steps to start your business. There is no need to fear risk when things are going well or not going according to plan. Risk may be just what you need to take your business to the next level.
Reach out to me for Strategic Business Advisory services and a conversation on how to effectively take risks.