For startup founders, taking entrepreneurial risks is often a necessity. Here, content head at digital marketing agency BlueGlass, Irma Hunkeler, lists five risk-taking considerations to bare in mind.
Taking entrepreneurial risks is a much-debated subject within the world of business. Some people believe that an entrepreneur is not inherently a risk taker – they’re not necessarily the “daredevils” of the business world, but are rather able to understand and calculate when to take risks and when to step back.
With that in mind, let’s look at five things to keep in mind when taking entrepreneurial risks, considering the psychological aspect of risk taking, as well as the physical action.
(1) Risk taking is a crucial part of being an entrepreneur
Taking risks comes easier to some than others, but all entrepreneurs quickly learn that risk taking is an essential and unavoidable part of starting up a business.
Risk taking is also one of the things that truly differentiate extraordinary businesspeople from the ordinary. This is obviously a learning process, particularly when you consider that research has shown we tend to overestimate the probability of something going wrong, and “catastrophise” unnecessarily.
(2) It’s about calculating which risks to take
There are different kinds of risk taking. Some are less “risky”, as they are decisions for which you can prepare far more thoroughly, assessing the pros and cons, and calculating possible losses.
Leonard C. Green, creator of the Green Group and Professor at Babson College, believes that the best entrepreneurs aren’t simply risk takers, but calculated risk takers. “It is the difference between failure and success,” he said.
The cliched notion of the entrepreneur as someone who gambles everything on a hunch does not make a great role model for someone who wants their business to succeed.
(3) Risk taking involves a certain loss of control
Even if you undertake a lot of research and plan for various outcomes, risk taking still involves a certain degree of letting go, which can be difficult for those who have to be in control at all times.
As an entrepreneur, you’ll need to be comfortable with delegating some responsibility to employees, as well as working with vendors, investors, mentors and partners.
This is another form of risk taking – having faith and trust in others, accepting the possibility of something going wrong, and yet not allowing this to hold you back.
(4) We all learn from taking risks
We learn vital lessons and overcome the fear of failure by taking risks. You have to train yourself to see risk taking as a learning experience – if something goes wrong, you can learn from it and make a more informed decision the next time around.
And if things go right, hopefully your fear of failure will be lessened the next time you have to make a difficult call. Entrepreneurs generally become more comfortable with taking risks over time, and experience of both success and failure will give you a better feel for making those tough decisions.
(5) The psychology of taking risks
Becoming more comfortable (and more successful) when it comes to taking risks may also be helped if you consider it from a scientific perspective. Our brains are basically hard-wired for taking risks, and the neurotransmitter dopamine rewards us with a natural high when we do something risky or daring.
It’s also worth considering that an adult makes around 35,000 decisions every day, many of which involve taking some form of risk, even when they’re everyday decisions such as leaving the house at the right time to catch a train, or judging when it’s safe to cross a road.
We’re already taking risks all the time – it just may be a little more obvious to an entrepreneur, for whom it’s often vital to the inner workings of their business.
Irma Hunkeler is head of content at BlueGlass, with experience working for clients in travel, retail, recruitment, technology and the third sector. She networks extensively and collaborates with industry experts on her writing.
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