Entrepreneurship typically requires taking one risk after another. In fact, for most people, the entire jump to entrepreneurship is a risk in itself—you’ll be risking your money, your career, and maybe even your personal relationships in the hopes of becoming a significant success. From that initial moment of commitment, you’ll be making decisions every day that could affect your company’s fate.
Some people thrive on this risk-taking journey, making decisions without worrying, but for most of us, a bit of panic sets in when we know we’re taking a risk—even a measured risk. It doesn’t matter if you’re in a sexy industry or managing a business in a boring sector. If you find yourself in a similar situation whenever you make a risky move, try using one of these five strategies to mitigate the effects:
1. Quantify the risk. Your first job should be to realistically evaluate the degree of risk you’re actually taking, and try to use numbers. They don’t have to be precise, but try your best to adequately estimate the factors at play in any given situation. For example, if you’re worried about purchasing a new piece of equipment to develop a new product, you might sketch out a 30 percent chance the new product is a breakout success, a 20 percent chance it’s a moderate success, a 15 percent chance it’s a total failure, and a 35 percent chance it simply doesn’t turn out as well as you thought it would.
These numbers should allow you to make more calculated, intelligent decisions, but just as importantly, they’ll help quell some of your intangible anxieties. When possibilities become tangibly measurable, they’re far less intimidating.
2. Be realistic about the worst-case scenario. With most risks, panic sets in when you overthink the worst-case scenario. Let’s take a look at that expensive piece of equipment from the previous entry; if you imagine here the worst-case scenario is that the product is a massive failure, you could easily jump to thinking your brand reputation will be damaged, and from there your entire company will collapse. However, this isn’t a realistic scenario. In all likelihood, you’d have to abandon the product and move on, but you’d be able to sell the equipment at a partial loss, recovering most of your investment, and you could move on to develop other, better products with only a temporary setback.
3. Set up backup plans and failsafes. Rationalizing a risk can help you more accurately understand its potential effects, but it’s still a risk, and that means there’s a possibility for an unfavorable outcome. To ease your anxieties, try setting up a backup plan or a failsafe in preparation for the worst-case scenario, or at least some of the least pleasant effects. For example, let’s say you’ve decided to move to a bigger, more expensive location in the hopes of impressing more clients and attracting better talent. What happens if, after six months, you find that you’ve actually lost talent and your client retention numbers aren’t any better? To prepare for this, you could build in an opt-out option in your lease, or you could start lining up some co-renters to help shoulder the burden of the extra expense.
4. Practice taking smaller risks. If you’ve taken these precautions with some of your major decisions, but you still find yourself panicking when faced with a potential risk, you can start soothing your anxieties by practicing on smaller, less significant risks. For example, you could order spicier hot wings at your favorite restaurant, knowing they might be too spicy, or purchase an item on eBay from a less reputable seller for a lower price. As these smaller various risks either reward you or fail with minimal long-term damage, you’ll grow more accustomed to a risk-taking environment, and gradually, even the big risks will seem smaller. Fill your life with these small risks and eventually it will all become second nature.
5. Learn to trust your instincts. There’s no precise methodology for this strategy, but it can help you get some perspective on your position as an entrepreneur. You are the creator of your own destiny, and it’s your instincts—no one else’s—that should dictate the future of your company. If they drive your company to success, you’ll be responsible for the path that led it there. If they drive your company to failure, you’ll walk away with more experience and better instincts for the next round. If you don’t trust your instincts, either way you might walk away with regrets.
As you continue as an entrepreneur, there’s no way to avoid risks entirely. In fact, the more risks you take, the more likely you are to eventually succeed—provided those risks are adeptly calculated and hedged. Put these strategies to good use as you continue identifying and taking risks on behalf of your company.