The Myth of Entrepreneurial Risk-Taking
Read More: Everyone seems to have their own "Top 10 list of entrepreneurial qualities" these days, and risk-taking almost always makes the Top 3. But is this really true? Do savvy entrepreneurs simply throw caution to the wind and fly in the face of danger when it comes to taking risks?
Let's examine this "myth of entrepreneurial risk-taking" more closely.
As entrepreneurs, everything we do has both an upside and a downside. We frequently make business and financial decisions depending on the level of risk involved. In fact, determining risk is a key factor in running a business-those that are good at it succeed and those who aren't all that good at measuring risk frequently fail. It's what makes the world of business go around.
Instead of taking risks, it's more about limiting risk.
Again, everything we do as entrepreneurs will have some degree of risk involved. Risk is just inherent. But this doesn't necessarily mean that taking risks is the secret to success. To the contrary, most entrepreneurs get to where they want to be by limiting their exposure to risk instead of proceeding blindly without regard to it.
How is risk limited?
There are a countless number of techniques that business executives and entrepreneurs use to limit their risk factors, including (but never limited to) the following:
- Performing meticulous research and planning
- Faithfully testing, tracking, and analyzing results
- Turning to education as a resource
- Relying on statistical formulas
- Maintaining appropriate levels of insurance
- Using a proven plan instead of trying to reinvent the wheel
And we definitely shouldn't forget the most common method of limiting risk-using good old-fashioned common sense. There are thousands and thousands of actual ways to limit risk. They're not necessarily all easy to define, but these concepts kind of give us a good representation of methods that are used every day in business.
Discerning the myths from the truth...
The notion that entrepreneurs are risk takers is just completely false. In fact, this is probably just about the single largest misconception about entrepreneurship that there is. Business people that produce results time and time again actually do everything they can to get ahead in the game while taking on as little risk as absolutely possible.
Some people just get lucky, but by no means is being a wildly successful entrepreneur about taking a gamble. Persistent trial and error, using the risk limiting factors we've discussed above all the while, is how most entrepreneurs get from point A to point Z as they define the path to their business goals.
To take risk is foolish!
And to say otherwise is just irresponsible. Entrepreneurs have it hard enough-financing isn't always easy to come by; winning business ideas and working models are just as difficult to source. Why would we want to waste the resources we've worked so hard to realize and limit our chances of succeeding by taking unnecessary risks?
Instead, as entrepreneurs, we should always think first in terms of accurately planning before acting and reducing our exposure each step of the way. Above all, we all need to remember that the concept of entrepreneurs being risk takers is just not reality.
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Comments: 7 
About the Author: Dr. Bob Clarke
Member Since: 12/12/2007
I'm a Distributor For:: Magnetic Sponsoring
Industry: Marketing and Advertising
Primary Web Site: http://BobandRosemary.com
Interesting... If you build
Interesting...
If you build a business that doesn't find success are you still an entrepreneur?
As a mentor I meet with people taking a hobby or a specific skill set and wanting to create a business with it. I'm always fascinated about what they think are the risks... versus investigating the limited risk list in your post.
Defining the risks (both personal and financial) and helping someone to think of themselves as an entrepreneur is a great way to create a posture for success.
I love this post!
Tami
Calculated
Entrepreneurs calculate risk. I am passing this on, great!`
No Risk No Reward and all Entrepreneurs Take Risks
Sorry Doc,
I don't agree with your concept of entrepreneurs don't take risks. It is no different than the old phrase, is the glass half full or half empty scenario? You have not defined risk, so to say an entrepreneur does not take risk is hardly the way most I know see the risk factor.
No matter how one looks at or defines risk, rest assure, it is real and exists when starting any new business. With every business venture having a high degree of failure rates, risk is unavoidable no matter how good your business plan is, or how good your product or service is, some things you cannot control, just like the economic climate we are now all suffering through. Risk is applified a hundred times when starting a business in a severe recession.
Sorry, but indicating there is no risk simply because an entrepreneur accurately plans out his business and does all the research in no way eliminates risk, it controls it at best.
No doubt, you want to understand the risks involved, but unless you define it clearly, how can you say you are controlling risk? I have started many businesses over the years, and know dozens more who are like me and have also started businesses, and if I asked every one if they were risk takers, they all would say yes, absolutely. Have you polled any entrepreneurs to see how they define risk, and whether or not they felt they were taking risks in their decision.
Taking risks is not foolish unless you had a way to know you would fail. Do you know if you will succeed or fail when you start a business? Absolutely not, you can plan all you want, but there is no guarantee to succeed, so how can you say there is no risk, or worse, say it is a myth for entrepreneurs?
I agree on limiting risk, but first you have to define it, as you cannot simply use a universal label of risk and then try to quantify the level of risk later. You have to have a full understanding of risk before, not after you take the plunge. What worked yesterday does not mean it will work tomorrow, so all the planning in the world will not eliminate the risk factor all entrepreneurs take. I am a risk taker, plain and simple, and I have moved ahead on businesses on more of a gut feel than planning, and I have succeeded. On the other hand, I had planned for years and failed when market failed, so how do you define risk? Simply put, taking risks is not foolish as you imply, sorry, but I respect your view point, but don't agree with it as a lifelong entrepreneur.
Success to all,
The word "entrepreneur"
The word "entrepreneur" means, literally, to undertake. It's related directly to the word "enterprise".
(In French, entrepreneur is also the name given to undertakers — funeral directors. Given the number of small entrepreneurs who fail, this would seem ironically appropriate.)
Your premise is correct, although spun to create controversy where its presence is questionable.
Entrepreneur also means "go-between" and "risk-taker" in common usage. As you so rightly point out, intelligent entrepreneurs take limited, calculated risks. Nevertheless, it's rarely possible to remove ALL risks... there will always be a residue of risk involved. The skill for surviving and thriving consists of identifying all risks and making an informed choice about whether to proceed or not.
Foolish (and typically short-lived) entrepreneurs take unacceptable risks and pay the consequences of their choices.
There's a third group, however, and we see them emerge every time a financial crisis or catastrophe occurs. They're invariably referred to as "entrepreneurs" or "failed entrepreneurs" and, like network marketers who have to take a hit every time some sleazebag rips off unsuspecting victims under the guise of "network marketing", it rankles when these fraudsters are tagged with a legitimate title when it's clearly wrong.
The so-called "failed entrepreneurs" (eg: Bernie Madoff) do NOT qualify to be called entrepreneurs.
REAL entrepreneurs take calculated, manageable risks, then accept the consequences.
These thieves and scammers ensure that EVERYONE ELSE has to accept the consequences of their high-risk, criminal actions.
In most cases, it's shareholders, suppliers, employees, pension funds and the government who end up paying, while they either vanish to a tropical paradise or spend too-short a time at Club Fed.
It's time we began making a distinction between legitimate entrepreneurs and their criminal counterfeits. Just as we need to make a clear distinction between REAL network marketing and the multitude of counterfeits inflicting damage on genuine network marketers every day.
John Counsel
http://REALnetworkmarketing.com
Never risk what you can't afford to lose
I like this post. It is something that I am becoming increasingly aware of in recent months. Real entreprenuers take calculated risks and do their best to minimize loss. Not only on their end but also on behalf of anyone who joins them in their venture. It is about doing your homework BEFORE making a commitment to starting anything new. This is solid advice for anyone looking to start any business whether in a traditional sense or network marketing venue.
What is the greater risk
Who really is the risk-taker? The person who works a job, gets laid off, and goes searching for another job with the same or higher chance of layoff; or the person who develops their own business with the help and mentorship of people successful in that same field?
I hope I am quoting this correctly but apparently Einstein said something to the effect that "insanity is doing the same thing over and over and expecting a different result".
Cheers! Calvin
Appreciate the wisdom of John Counsel
"REAL entrepreneurs take calculated, manageable risks, then accept the consequences." John Counsel
Semantics is always and interesting subject regarding
discussions.
First my simple position is:
My business decisions have always been made after research of Market, the amount of Awareness I possess in the Field, and a solid Budget and Cash Flow projection.
There is always RISK.
My first Radish crop Made me an Overnight
"millionaire" 40 years ago. I had little experience but did
study Market Trends and weather patterns.
Subsequent crops followed normal cycles of Win-loss,
but research and masterminding indicated the year would be
in the the Black and it was.
I believe there is "risk" involved in all
business activity, but I also concur the "calculated Risk" is the Key.
I am appalled at the lack of business understanding by aspiring MLM marketers and On-line Marketers. No one wants to take the Time to establish a Business FOUNDATION before they wildly spend money on a "hope and prayer" or the Slick presentations by Strangers or other inexperienced business persons.
My clients in MLM and On-line and offline have learned how Simple it is to assure Success by developing the Entrepreneurial Mindset, be willing to practice the mundane and apply Massive Action to a well designed Business Plan.
Chuck Bartok
www.focussociety.com
www.chuckbartok.com
www.beginnersmarketingclass.com
530-798-0245