There’s a mythology about entrepreneurs that I’m not sure is entirely true. I bet you’ve heard it: Entrepreneurs aren’t afraid of risk!
You sure about that?
There are a lot of reasons people start their own businesses. They believe in an idea they have. They can’t stand having a boss. They love the idea of unlimited earning potential.
I’m not sure love of risk is high on that list. Sure, you take a certain risk by going off on your own, but even that’s overstated. Your business could fail and you could be without income. But when working for someone else, you could get fired tomorrow. There’s some risk to anything you do.
The truth is that, to hit it big, entrepreneurs could use a bit more tolerance for risk than I think they sometimes have. And I include myself in that category. It’s something I’ve had to learn over the years.
Aversion to risk won’t necessarily stop an entrepreneur from starting a business, but in too many critical cases, it stops the entrepreneur from going all-out on an opportunity that could have meant everything to his or her enterprise.
In the right situation – when the facts are clear and the metrics look good – the right move is to defy all fear and go for it 100 percent. It’s always better to go all-out than to go halfway. Yet too often entrepreneurs don’t go all-out because they’re nervous about the risk.
I’ll give you two examples from my own history to illustrate the point.
About 15 years ago, when I was early in my entrepreneurial journey, I had an opportunity to take my business in a different direction. I did lots of research and the metrics looked excellent. It would have required me to part ways with some people I was working with at the time – and they weren’t too thrilled about it – but the facts told me it made sense to jump on the opportunity. And I decided to do it.
But in the course of the next 24 hours, fear set in. My situation at the time didn’t hold the promise of this new one, but it was reasonably stable. I had a family with young children. The risk started to bring me worry, and then fear.
I reversed course, didn’t take the opportunity, and stayed on the path I was already on. I gave in to fear. Looking back now, I’ve watched how the situation that presented itself developed and I realize I would have had significant success with it. The fear I gave in to was unfounded.
The issue was mostly security, but there was a little ego involved as well. Had I taken the opportunity, I would have endured a short-term step backward in my perceived prestige. It would have been like leaving the corporate executive suite and working in your basement, and that wouldn’t have looked like a step forward.
None of these are reasons to pass up a solid opportunity. I feared the risk I’d be exposing myself to, and I couldn’t get comfortable with that risk. So I bailed.
I regret it, of course, but it’s one of those experiences you learn from. Another thing I’ve learned is that half-measures are worse than no measures at all.
About eight years ago, a very hot piece of technology created another opportunity for me. Many of my clients were interested in it, and they wanted to see me invest in the technology so I could put it to work on their behalf.
There was some other technology I was already using for many of the same purposes, and it was making us money, but it didn’t have the promise of this new innovation. Indeed, the new one could do things that would have taken my clients to new heights – and us with them.
But I was hesitant. Completely abandoning existing technology that was making us money made me nervous. The best way to go with the new one was to embrace it completely, and migrate everyone to it. It would have given them better results very quickly.
And yet, if for some reason things didn’t work out, I figured I’d be in trouble without the ability to go back to the old one. So I split the difference. I brought in the new technology but also kept the old. I was hedging my bets. I thought it was best to be careful and not burn the old ships before the new one was fully at sea.
I should have burned the ships. The approach I took confused people. Was the new technology really better? If so, why not give everyone the full advantage of it? Why keep the old if it wasn’t as good?
Worse, I kept finding things not to like about the new technology, as a way of defending my decision not to fully commit to it. I developed a bias born of my own fear. I was looking for something to confirm my fear and doubt, and I grabbed onto anything that seemed to fill that need.
Some of my team felt better with the cautious approach, and I was sensitive to their concerns. But that proved to be a failure on my part as a leader. All the facts said the new technology would perform for us and for our clients, and my job as leader was to show the team that without dismissing their concerns.
Instead, I let uncertainty and doubt creep in – and then build upon itself, as it so often tends to do. And the benefit I could have gotten from really committing myself to this opportunity eluded me.
Understand, I am not talking about wild risks. Neither of these fits that description. In both cases, I had done my research, run the numbers and double-checked my findings. The opportunities were solid.
I was just nervous, and the risk bothered me too much in both cases to pursue it as I should have.
Fearless? Entrepreneurs? I wish it was true. But as we go along, we can all learn that risk is nothing to be afraid of. The requisite risk/reward analysis is always necessary, of course, but when the facts clearly tell you to move decisively, will you?
Or will you let fear hold you back? I let fear hold me back in these two instances. I’ve learned. I hope you will learn from my mistakes instead of having to learn from your own.
Written by: Wade Wyant
Red Wagon Advisors