There is a perception that entrepreneurs are wild risk takers.
Maybe it’s because some entrepreneurs are thrill seekers. Doing things like climbing mountains or taking balloon trips around the world.
Or maybe getting into race car driving. Flying planes.
But those are just hobbies. Things they do in their free time that may really be dangerous or maybe not that dangerous at all the more you look at the specifics.
But on the business side of things too there seems to be the perception that entrepreneurs are and have to be willing to take risks that others aren’t.
Is that true?
The Initial “Risk”
This might be where the thought of the risky entrepreneur comes from.
There is definitely initial risk of starting a business.
But let’s look at that initial risk in another way. Dating.
You’re single. You’re looking for love. You see someone you’re attracted to and you have two options:
- Talk to them
- Don’t talk to them
Talking to them might seem like a huge risk. It can be scary.
But what is the risk? What is the worst case scenario?
The person turns you down. Tells you not to interrupt them. Tells you to go away.
Yes, that might hurt your feelings. But you’re simply right back where you started. In fact, you’re closer to your goal of finding the love of your life because you now know that this person is not for you. One less person in the potential pool of options.
That’s kind of how starting a business is. If it fails you don’t really set yourself back that far.
But now let’s think about the upside.
You talk to that person and it turns out they are the love of your life.
Talk about an upside.
So you have very little to lose and just about the best thing possible to gain.
That doesn’t seem like much or a risk at all.
It’s really like that in business. If you do try to build the business and it works out you’ve gained something incredible.
But if you never try you’ll never know.
Yes, maybe you invest some money, but there are plenty of businesses you can start without putting yourself in deep debt.
But most successful entrepreneurs don’t do that. They focus on the long-term. They have patience. They know that building a business can take a lifetime (and usually beyond).
Low Risk, High Reward
I’ve read quite a few business biographies. It’s amazing how similar a lot of successful entrepreneurs can be. They often might take that initial risk, but beyond that they almost universally look for low risk and high reward.
The businesses that fail (see: How The Might Fall) are often the ones that grasp at straws. They take huge risks and often fail.
The ones that succeed work tirelessly to find the best options. Low risk and high reward.
They won’t build hug factories without fully understanding the risk. And they likely won’t mortgage the entire company to build a factory. They’ll move slowly so that they’re never risking the life of the company for a bet.
Sometimes from the outside it can seem like entrepreneurs are taking big risks but we often only see the big payoff. We think they must have taken a huge risk in order to see that payoff.
But I would say 99% of the time the risk was actually very little. They just worked to find that type of opportunity.
There’s a couple sayings I like. The first is something like you only have to get rich once. The second is something like once you have money it’s not about making more money, but preserving that money.
Entrepreneurs that are successful are really good at both of those things. They don’t throw money at just anything. They want to keep their money.
Two big takeaways from this one. The first is that if you think being an entrepreneur is for you, but you haven’t taken the leap yet you might be looking at risk all wrong. It’s not the downside that is the issue, but the upside. Focus on what you stand to potentially gain with hard work and patience.
If you’re already near the bottom you don’t have far to fall if it never works out. But there is a huge upside.
And two, entrepreneurs really aren’t that risky even after they succeed. In fact, especially after they succeed. They often look for the lowest risk possible, but with the biggest upside. They don’t invest in a lot of things. That’s what Toby Keith said. Out of 100 offers that come to him he may accept one.
Low risk. High reward.
That’s anything, but risky.