When launching a new business, entrepreneurs may have to take such risks as leaving a full-time job or using their own money as startup funding. While entrepreneurs tend to be highly tolerant of risk, they do not have to be daredevils to make it big. The key to success is to take smart risks. Entrepreneurs should stay measured, be prepared, and understand how much they can afford to lose before they take the plunge.
Basso says that he only takes calculated risks. While he sets out on a new venture every year, he does it with money he has set aside to invest. He knows he can afford to lose this money because it is not earmarked for expenses like his mortgage or his kids’ college education. He calls his Basso on Business brand his riskiest venture yet because he does not know whether this business will pan out. But his past investments in entertainment lead him to believe that he can be successful now that the entertainment is him — especially now that he has more control as an investor when it comes to developing the product.
Not only must entrepreneurs realistically calculate the amount of risk involved in a new venture, they must often convince others to take on that risk as well. Broadway producer Ken Davenport has worked to sharpen his instincts about what kind of show is a good bet. Since he has had more wins than losses, he has been able to keep getting people to invest in his projects. He knows, however, that investors could cease to believe in him, so he hedges his bets by working with smaller projects that allow for more flexibility. As a result, he is mitigating the risk for his investors while building his reputation at the same time.
Risk often has negative connotations, but entrepreneurs can put this factor to work for them by:
*Becoming comfortable with — and even happy about — risk, which can fuel creativity and growth.
*Determining options for handling risks from the outset and staying nimble enough to take on change.
*Undergoing training through school or a mentor to learn ways to mitigate risk.
*Realizing that caving in to fear can lead to more of a failure than taking a chance.