Should an entrepreneur always be willing to take a risk? Yes and no. There are many variables to consider first. It often depends on the calculation of the risk needing to be taken, that determines whether an entrepreneur will “take the plunge” into starting a business.
Entrepreneurs are not really risk-takers in the traditional sense of the term. They typically don’t take a blind leap of faith, but rather carefully map out the pros and cons of taking a risk. Many actions we take on a daily basis are risky. Think about driving your car from point A to point B. Even if you’re driving a short distance, there’s no guarantee you will make it safely to your destination. We look at factors such as the driving distance, the safety and speed limit of the roads where we will be driving, and whether it’s a safe neighborhood we will be driving through to help us make calculated decisions about taking the risk of driving. When we decide to “go for it,” our better judgement is telling us that the reward outweighs the risk.
The Role of Calculated Risk Taking in Entrepreneurship
To a certain extent, running and growing any business is risky. When you don’t know the exact outcome of a business decision, risk is always a factor. How entrepreneurs handle risk is what differentiates them from other career-minded people. Entrepreneurs must develop their calculated risk-taking strategy if they are to survive and thrive in the entrepreneurial world. Risk is fundamental to investing; therefore, it is necessary to starting a business. In Forbes, one article aptly states: “If the reward is too small, it’s not worth the risk required to obtain it. If the reward is large enough, you’d be willing to take on more risk to obtain it.” To get started, a great first question to ask yourself is: Is my business concept worth the risk?
How Much Risk is Appropriate?
Asking “how much risk is too much?” is really the wrong question. What you should be asking is: “What kind of risk should I take?” This last question will answer both aforementioned questions. Because entrepreneurs develop their risk-taking strategy over the course of their careers, the most successful ones learn from experience that they must become excellent calculated risk-takers. It does no good to leap blindly into a startup without first counting the cost.
What is meant by the term “calculated risk-taker”? First, we must define “calculated risk.” According to Merriam-Webster, calculated risk is “a hazard or chance of failure whose degree of probability has been reckoned or estimated before some undertaking is entered upon.”
To mitigate risks, entrepreneurs can strategize extensively during the pre-planning phase. In an article on Wharton Online, the author iterates that, “Research, marketing, planning, testing, and reporting are a few strategies entrepreneurs use when taking calculated risks.” Even if you plan perfectly, unexpected circumstances have a way of popping up at the most inconvenient times, and your start-up may still fail. It’s impossible to account for every variable, which is why a calculated risk is still a risk! With calculated risk-taking, you at least have a better probability of successfully starting up your business.
When is it a good idea for an entrepreneur to take a risk? Technically, taking a risk can be rewarding as long as the person taking it has carefully weighed the advantages against disadvantages and determined it to be a risk worth taking. Here’s a question: have you found yourself taking the risk of starting a business, only to realize maybe you had bitten off more than you could chew? Did you first carefully strategize your start-up execution, or did you just take a blind leap of faith and hope everything would work out? There’s nothing wrong with taking a leap of faith, but it’s not a great idea when it comes to business strategy.
Are you interested in seeking the help of a business consultancy to help you hone your calculated risk-taking skills? Here at Aepiphanni Business Consulting, we specialize in helping small, struggling businesses stay afloat by implementing results-driven strategies so your business can win! You can contact our team of experienced business professionals by clicking here.
Aepiphanni is a business consultancy that works with values-driven entrepreneurs seeking to organize, optimize or expand their business models. Your company’s excellence is our end goal, and we achieve this through our vision and messaging and the implementation of proven, holistic business strategies, thereby enhancing your business’s performance so you can win. Our entrepreneurial, multidisciplinary team works with clients to develop differentiating solutions and provide direction focused on lasting, strategic results. We exist to help our clients CREATE | DESIGN | BUILD extraordinary businesses.
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