5 Ways Entrepreneurs Minimize Risk
Contrary to conventional thinking, entrepreneurs are NOT risk lovers. They are outstanding risk managers. See five ways entrepreneurs minimize risk.
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It’s National Entrepreneurship Week. Many people don’t know it, but historically, it’s small business – not large companies – that creates jobs. Of every three net new jobs created, two of them are created by small businesses. They are the engine of the economy.
We saw a great article over at Bloomberg by innovation consultants Michael Maddock and Raphael Louis Viton. They note a new phenomenon: Large companies are hiring professors to teach them how to innovate. The authors assert that it’s misguided:
“What big, process-driven companies need is to learn how to think like entrepreneurs. And it may surprise you that entrepreneurs hate risk, too. Unlike many professors, entrepreneurs feel comfortable not knowing what comes next, but they don’t see this as risk.”
Based on this article, we’ll share five ways entrepreneurs minimize risk.
1) Working for themselves
As a twist on the old saying goes, “Don’t put all your eggs in one job basket.” Entrepreneurs think self-employment is less risky than employment. Or as the authors of the article put it: Owning may offer more security than a job.
When you work for someone else, you’re at their whims. When you work for yourself, you have more control. Entrepreneurs minimize risk because they believe more control means less risk.
2) Move quickly
There’s a military concept called OODA Loops. OODA is an acronym for:
You gain an advantage in battle – or, in business, in gaining customers – by taking action as quickly as possible. Because when you get on the field of battle – or when you enter the marketplace, you engage with customers at a different level than your competitors who are still working with pen and paper – or more literally, with keyboard and screen. You soon gain an advantage which is hard for them to erase.
3) Don’t be afraid to fail
Failure is popular these days. You may have heard this sentiment before. “Fail fast and fail often.”
It leads a lot of people astray:
Because failure isn’t the goal.
Going back to OODA Loops, you may act and fail. That’s okay – you now have another observation to start through the loop all over again. Note it, re-orient yourself, decide to move forward, and act.
But the goal is, and always will be, success. It’s just that success is often discovered through failure. So welcome failure for what it is: a stepping stone.
4) Take risk you can afford
Novices focus on the rewards. Successful entrepreneurs focus on the downside, the risk. How much can you afford to lose?
$100? What business can you start for $100?
Can’t afford to lose $100? How about $50?
Maybe it’s not about money. Can you spare 10 hours a week? No? Ok, how about 5 hours a week?
What can you do with the resources you already have?
5) Get comfortable not knowing what comes next
Strategic planning, as taught in business schools, require us to predict the future. But how do you predict the future in the volatile, fast-changing world that we live in today?
Entrepreneurs don’t try. They do something else:
Entrepreneurs create their future.
One way they do that is by setting half-ass goals. It’s ironic: BIGG success comes in small steps. When you’re first getting started, set activity goals, small steps you can take to advance toward a goal.
For example, you can set a goal to make $1,000 of sales this month.
But how do get there?
You don’t know. So test something and track your results. For example, you may email 5 people a day, 25 people for the week, 100 people a month.
From this activity, you generate $1,000 in sales. But note – you started with an activity goal (5 emails a day), not a results goal ($1,000).
When you don’t know what’s next, test small actions and see what results.
These points are important to keep in mind when thinking about starting your own business. Contrary to popular myth, successful entrepreneurs are not risk lovers. However, they are excellent risk managers.
They think differently. In business school, we learn that you have to take larger risks to earn a greater return.
Entrepreneurs know this isn’t necessarily the case. They focus on making the downside acceptable and let the upside take care of itself. It leads to BIGG success!
Here’s to your BIGG success!
George “The Professor” & Mary-Lynn
Co-Founders, BIGG Success
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