The Five Risks Even Risk-Averse Entrepreneurs Must Take
Originally published in AllBusiness, Sept 29, 2015
Unschooled politicians and media commentators often observe that successful entrepreneurs are folks who love taking risks– they’re flat-out wrong.
Successful entrepreneurs know that they’re not in the business of taking risks; they’re in the business of mitigating risk. They learn everything they can and take careful steps to reduce their risk to the lowest possible level before they leap into a new undertaking.
But not every risk can be mitigated. Not every unknowable can be known. Sometimes the only option is to leap from the cliff, relying on your faith in yourself to provide a parachute.
What are the “scary unknowables” that mark the edge of the cliff where a leap of faith is required? Here are the five encountered by almost every new venture:
1. Is this really a good idea?
The possibilities make you almost giddy, and you’ve had a hard time sleeping while you imagine everything that might be just around the corner. But you won’t know for sure until you step off the cliff.
You probably have been asking yourself all along whether the idea is new enough and different enough to carve out a position in the market. If it’s an old idea, you’ve probably remembered the observation of Warren Buffett that even a discarded cigar butt can be a good deal—it’s not much of a smoke, but the easy single puff will be all profit. And you’ve probably asked yourself repeatedly whether your idea, great as it may be, can be translated into a profitable business.
No matter how many questions you’ve asked yourself, and no matter how honestly you’ve answered, you can’t know with absolute certainty until you take the leap.
2. Can I pull this off?
You are smart, knowledgeable, savvy about the ways of the world, nimble and certain that you know what you are doing. But you never will know with certainty if your skills and personality traits are the right ones until you take that leap of faith.
It’s always helpful, of course, to complete an honest assessment of your own talents. Are you great at sales but lousy at administration? Or are you an engineering genius who gets lost in finance?
You probably have a good idea of the resources that are immediately available to you—your financial capital, your best friend’s advice on marketing—and you’ve spent some time thinking through how you can hire or attract the resources you need to bring your great idea to reality.
Will your skills and heart be enough? Can you woo the talented help you need? To find the answer for sure, you must take that leap.
3. Will anyone pay for this?
Your research found that there’s nothing like your great idea anywhere else. Your market is hungry for a product just like this, so you think.
Potential customers say all sorts of things when they don’t actually have to commit real dollars. But when they need to reach for their wallets, are you offering them something that they consider to be a worthwhile purchase?
Sad to say, you will get a definitive answer only after you swallowed hard and leaped from the cliff.
4. Is the messaging right?
Your product is great. But if your messaging doesn’t tell the right market about the product in just the right way, someone is going to end up with a garage full of unsold stuff.
Marketing experts love to pretend that they can shape messages that will cause buyers to act in just the way you want. They can’t.
If your messaging is right, you’ll know when you step off the cliff. Not a moment before.
5. How’s your timing and your luck?
If you know that your luck is perfect right now, you probably should head to your nearest casino and save yourself the trouble of nurturing a great idea into a great company.
But if you are unable to tell the future, and if your luck generally seems to be about average, prepare to close your eyes and take two steps forward toward that cliff edge that’s one step ahead of you.
But for all your worries about taking that leap of faith, remember this: The greatest risk lies in not taking the brave step at all.