There’s a common theme amongst entrepreneurial success stories: they’ve all taken a risk of some kind in order to live their dream. If there was a book called, “Being a Success 101,” chapter one would most likely be, “Take Risks to Earn Big.” And that’s not only encouraging, it’s expected.
However, if you take a risk without a clear cause for that specific risk, you’d be imitating a bull in a china shop, doing far more damage than good.
Yes, you must take risks, and although this may sound paradoxical, you should take risks with caution. Steven Mundahl, a leadership expert and co-author of The Alchemy of Authentic Leadership (2013), says that it can sometimes be difficult to determine the difference between calculated risks and reckless actions.
He suggests monitoring certain traits in order to become more self-aware, helping you to avoid making destructive decisions that can be damaging to your company.
The following 4 points will help you remain focused on taking risks without suffering from unfavorable consequences:
1. Be Aware of Adrenaline
Mundahl believes that people who are generally risk takers in their everyday lives (participating in “risky” physical activities such as skydiving, riding roller coasters, etc.) develop a tendency to take risks in their professional lives as well.
Such individuals thrive in specific business situations, such as chaotic office environments or high-stakes decision making. Mundahl believes it’s important to recognize the adrenaline rush rather than riding the crest of its wave. If you simply go with the adrenaline, you could end up making rash and impulsive decisions that can be detrimental to your company’s growth.
2. Consider the Outcome
You’re more likely to be reckless if you have little concern for the outcome of your actions. You’ll end up making decisions or taking action on business matters that could cost you a lot of money in the long run. Your lack of research due to your apathetic approach could lead to losing a major client or making a bad choice on a new hire.
While, as an entrepreneur, you should not be restrained by fear, you should still realize the impact that a failed decision or action can have on your company. You’ll soon find that your company is suffering less damage as a result of your caution.
3. Don’t Always Go with Your Gut Feeling
Many successful entrepreneurs have gone with their gut feelings when making business decisions. Richard Branson has famously said, “I rely far more on gut instinct than researching huge amounts of statistics.” For someone worth $5.1 billion, it seems that going with your gut is not a bad option after all. However, it’s safe to assume that not every decision at the Virgin Group was made on such intangible impulse.
Mundahl says that impulsive people tend to follow a plan momentarily before throwing it all away with a decision that is more appealing at the time, rather than keeping the bigger picture in mind. Branson aside, you should be reliant on information before making big decisions for your business.
Contrarily, a report on AllBusiness.com discussed a Fortune Knowledge Group study revealing that 62% of executives felt it was often necessary to rely on “gut feelings and soft factors when making big decisions on partnerships and proposals.”
However, AllBusiness was quick to point out that recent economic history suggests that good business data, coupled with experience, should also weigh into the equation. In fact, new business intelligence (BI) technologies indicate it’s best to make important business decisions without risking it all: “Take all facts, statistics, and numbers into account, and only after empowering yourself with that knowledge, determine what your gut tells you.”
4. Be Accountable
An article on entrepreneur.com describes reckless decision makers as having “higher levels of denial” and avoiding the reality of their choices. Such individuals end up making excuses for why certain decisions don’t work out.
When you don’t practice self-accountability you’ll end up making ill-informed decisions because your subconscious will suggest that you shouldn’t be held responsible for whatever happens in the end. This kind of get-out-of-jail card will make you lazy when it comes to researching information before making agreements or working on projects.
Shape your mindset so that you’ll be held more responsible for your actions. You’ll begin to approach each new task with a little extra caution and a much lower rate of failure.
The courage to take risks is a significant differentiating trait in those that merely “wish” and those that actually “do.” This is not a damning report on those that take risks, but it merely showcases the importance of taking calculated risks, which will not only help limit damage, but can in fact add to the longevity of your business.
Use data to either make a decision, or, if you always go with a gut feeling, using that data to see if your gut instincts are on the right path. The Economist Intelligence Unit (2014) indicates that, “Executives use data to confirm that their gut feeling and pre-existing beliefs are correct.” In fact, according to their study, “57 percent (of senior business professionals) would reanalyze data if it contradicted their inner gut feelings.”
You can conclude that both risk and caution should be used simultaneously. Using the best of both is best. There’s lesser risk in that.