From the outside looking in, entrepreneurs look like huge risk-takers who are always on the lookout for the next big adrenaline rush. But as you know, this isn’t always true. The key to success is finding a way to take risks, without exposing yourself too much.
The Role of Risk in Entrepreneurship
Risk-averse people like to talk about risk as if it’s guaranteed failure, but this is the glass half empty perspective. While you could fall flat on your face, you could also enjoy enormous success. You won’t know until you try.
Risk plays an important role in entrepreneurship. It’s the source of true innovation and the place from which true success is accomplished. If you want to achieve something that’s never been done before, a certain level of risk is required.
As entrepreneur Eddie Dovner says, “Some businesses may skate by on doing something they’ve always done or sticking to a stereotypical way of running things, but for many industries, this mindset will not work. Do you just want to have a mediocre business or do you want to be an influencer in your industry, who invents new products and ways of accomplishing tasks?”
With that being said, there are varying levels of risk. What sets successful entrepreneurs apart is their ability to identify and avoid bad risk, while embracing risks that offer the opportunity for high rewards. It sounds simple on paper, but it’s much harder to do when you’re operating in real time with so many unknown variables.
Practical Ways to Reduce Your Dumb Risk
The real challenge for you is to embrace good risk while avoiding ill-advised decisions that put your career, business, and personal finances in extreme jeopardy.
Exactly how you do this is up to you, but here’s some guidance from those who have walked in your shoes:
1. Create a Plan (And Stick to It)
When it comes to risk, few people understand what it takes to be successful more than investors and traders. They often talk about their choices in terms of “smart trading.”
According to RJO Futures, “Maintaining discipline and emotional distance is a key component of smart trading. Successful traders have the discipline to stick with their trading plan, while also maintaining the flexibility to seize upon developing opportunities.”
In your own entrepreneurial pursuits, you would do well to create a plan and stick to it. This ensures that you stay on track, even when emotions get in the way. This isn’t to say there aren’t moments where a deviation from the original plan is acceptable. However, you’ll often find that the urgency you feel to move away from your strategy is rooted in something less than objective.
2. Use Predictive Analytics
We operate in a business world where we have access to mounds and mounds of data, sophisticated algorithms, and powerful platforms that measure and predict risk. Tapping into these resources is a no-brainer.
If you’re new to the idea of predictive analytics, spend some time studying the topic. You’ll be amazed to learn just how much this technology is being used in large corporations and successful business ventures. Integrating it into your own entrepreneurial pursuits could prove invaluable.
3. Surround Yourself With the Right People
You are only one person. No matter how smart you are, or how advanced your intuition may be, you’ll never be able to properly reduce risk on your own. Your best bet is to surround yourself with people who are sufficient in areas where you are deficient. You want people who think differently than you and tackle problems from unique angles. This helps you see a risky proposition from multiple vantage points. The result is a diminished chance of catastrophe.
Take Charge of Your Future
It’s called “risk” for a reason. No matter how much due diligence you perform, or how well you follow a specific strategy, there’s always a chance that you could end up on the wrong side of a decision or investment. The best thing you can do is remain disciplined and use all of the information you have available to you in the moment. In doing so, you’ll find that your chances of success are far greater than the possibility of failure.