Entrepreneurs face numerous daily risks that would seem insurmountable to non-entrepreneurs.
How do they develop the confidence to take these risks? They get comfortable taking risks.
Many people avoid entrepreneurship due to fear of losing everything—money, time, investment, and even social standing.
Risk-taking is a skill that can be honed through practice. By consistently making smart, calculated risks, entrepreneurs can reap significant rewards.
In today’s blog, I’ll share practical strategies to help you take more smart risks daily, even if it starts with taking that first leap into starting your business.
Let’s jump in.
The truth is simple, most entrepreneurs don’t see it initially and this is the first thing we get our clients to see.
As an entrepreneur, you’re essentially an investor. You’re investing in yourself, your time, and your money, hoping for a return on that investment. There are no guarantees.
So, why do entrepreneurs take these risks?
They’ve experienced enough success to know that most of the time, it works out, whether in the short or long term. This knowledge helps them progress closer to their goals. However, simply knowing this doesn’t make taking regular risks and making decisions to achieve success any easier.
To overcome this challenge and become better at taking risks in your business and life as an entrepreneur, I’d like to start with a quote from Jim Rohn, a renowned personal development expert. If you’re not familiar with Jim Rohn, I highly recommend checking him out on YouTube.
He famously said, “It’s all risky. Starting a business is risky.”
Starting a business is inherently risky. Regardless of whether you take action or not, you’re taking a risk. If you don’t pursue your passions in life or avoid taking these risks, you risk never doing them at all.
You risk living an unfulfilled life, filled with regrets and wasted time.
Every passing day brings you closer to aging, and time is finite.
So, if you have a desire to achieve something in your life or build something meaningful, delaying it only increases the risk. The longer you wait, the more challenging it becomes, and the less time you’ll have to accomplish it.
Now, I’m not suggesting that age is a barrier to starting a business. Of course, it’s possible, but the odds are in your favour if you start sooner rather than later.
This mindset of taking risks is empowering.
It’s crucial to recognise that if you don’t make decisions or take calculated risks, you’re not moving forward. You have to. It’s an absolute necessity. I can’t even begin to overstate the importance of this mindset.
Another key aspect to understand is the people who have achieved great wealth, who have built remarkable things, and made a significant impact on others’ lives. They’ve taken enormous risks throughout their journeys.
However, upon reflection, it’s evident that they didn’t make a single, monumental risk at once. Instead, they gradually accumulated smaller risks, building up to that point. They developed the necessary muscle memory and habit rituals to be able to take calculated risks.
This is because momentum plays a crucial role. The smaller the risk, the smaller the reward. But as you progress, the rewards increase, allowing you to build upon your success and expand your business. Consequently, you can take on even greater risks.
So, remember, you have to build this “risk” muscle, just as you would if you wanted to get a six-pack or big biceps. Repetition of sit-ups or curls are the key.
Starting a business on the side while working is a low-risk endeavour. You’re not quitting your job, so you still have your income. The only risk is sacrificing your free time, but it’s worth it. You’re dedicating a few hours each weekend to work on your business, building your skills and knowledge.
This is a small risk, but it’s a risk nonetheless. You’re replacing your recreational time with business-building, and you’re building a habit. Start small and gradually take on more.
Next, consider taking a bigger risk: investing some of your spare money in your business. You might normally spend money on coffees, dinners, or long weekends, but now you’re using that money to build your business.
The risk here is that you might not be able to enjoy those things for a while. But if your investment pays off, you’ll be able to enjoy them even more when you’re successful as an entrepreneur.
Remember, these are just baby steps to building the muscle of taking risks.
You have to be willing to take these small, minimal risks. If you’re not, you need to reconsider whether you really want to start a business. This is something you have to get used to. You can’t say, “I want to be an Olympic athlete,” but then not be willing to work out.
This is the workout you need to do in business.
One thing that really helped me understand the concept of “what if I lose it all?” was when I imagined myself losing everything: my job, my business, and even my home. I thought about what would happen if I had no money.
So, I did something. I took action.
When I embarked on my full-time entrepreneurial journey, after quitting my day job to become a business builder, I made a conscious effort to drastically reduce my expenses. I adopted a minimal viable lifestyle, living in a one-bedroom apartment and cooking at home whenever possible. These experiences taught me that I could comfortably live with very little.
Even if, for some reason, my business venture failed, my expenses were manageable. I could cover my bills by working part-time on Saturdays and Sundays. This mindset helped me realise that the worst-case scenario was not as dire as I had imagined. I would still be financially stable.
Of course, this level of expense reduction may not be feasible for everyone and certainly wouldn’t for me now that I’m in my 40’s with a family. My situation back then was not extreme, and I didn’t have to move back in with my parents. However, it’s important to understand that money, or capital, is essential for survival in business. If you don’t require a significant amount of capital to sustain yourself and your team, you can extend your business’s longevity.
This extra time provides a runway for growth and experimentation.
Another strategy you can employ is to confront your fears before taking risks in your business. For instance, before launching a new product, changing your pricing, or making a major hire, ask yourself, “What’s the worst-case scenario?” What’s the most dire outcome that could happen in this situation?
This exercise may seem daunting, but it’s actually quite comforting. It’s not about dwelling on doom and gloom; it’s about facing reality. What’s the absolute worst that could happen? And is that truly the worst possible outcome?
For example, let’s say my new product flops and I don’t attract many customers. While that would be disappointing, it’s not the end of the world. On the contrary, it could be an opportunity for learning and growth.
I didn’t the results I was hoping for, but I gained valuable insights so I can go again.
For most people, this means being cautious with their expenses for a few months.
Reflect on your reasons for pursuing this journey. Remember that this phase is temporary, a learning opportunity to take risks, overcome challenges, and refine your investment strategies. Understand that the sacrifices you make now will be worthwhile once you achieve product market fit and realise the positive returns on your investments.
Maintain a strong desire for your vision and the life you want to build for yourself and your business.
Lastly, take calculated risks.
Not all risks are equally valuable. Avoid reckless decisions without thorough research and understanding of the potential pros and cons.
Ensure that any actions you take align with your willingness to face the worst-case scenario. This is why planning for the worst is crucial. Imagine the consequences if your efforts fail and outline how you would handle them.
Calculated risk involves taking calculated chances, such as investing £5,000 in a company with the hope of generating a return on investment. If you lose all your money, does that mean you can no longer pay your rent? This exercise helps you assess your financial stability and determine if you can withstand the potential consequences of your decisions.
Don’t take the risk. It’s a terrible situation to put yourself in. However, if you’re going to be just fine, it might mean you won’t be able to go on that fancy vacation you wanted that year, and you’re okay with that.
This is a calculated risk you can live with. A part of that calculation is understanding your chances of success and how confident you are based on actual facts and tangible evidence that you or your team can provide, indicating that this can be accomplished if certain conditions are met. You can even use a confidence scale from 0 to 10 and say anything above 7, I feel comfortable with.
You need to build the muscle memory when it comes to taking risks. Risks are an integral part of business. Looking back, I realise that every day I go to work, I make numerous small risks that I would have lost sleep over just a decade ago.
This is because I’ve become immune to the feelings that accompanied those risks. I’ve essentially told myself, “Hey, it’s no big deal, I’ve assessed the risks and I’m comfortable with it.”
I’m going to be fine. Part of this is detaching your personal identity and emotions from the decisions you make in business. These are experiments.
These are opportunities for you to succeed, and sometimes you will fail. However, it’s not truly a failure because you’ll learn from it for next time.
You won’t make that mistake again. As Jim Rohn said, whether you take a risk or not, you’re still taking a risk.
The reality that many of us don’t ever consider. Life itself is a risk.
You took a risk when you chose your career. You took a risk when you got married or met your significant other. You took a risk when you decided to buy your house or start a family.
All these are risks, but we’re comfortable with them because society has told us that they’re normal. These are things that everyone does.
The reason why entrepreneurship is scary is that not everyone does it. Not everyone takes those risks. But the more you become familiar with entrepreneurship, the more you realise that it’s normal.
It’s just like any other risk in life. Consider the worst-case scenario, the positives, and the negatives, and then make a decision based on that.
Got a burning question? Reach out on our social channels or email michael@purpleyak.co.uk
Thanks so much for your time today, and I’ll catch you on the next one.
I’ll see you then. Take care.
Comments