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I have a friend who keeps getting into trouble. He broke his ankle jumping from a high wall. He got drunk and drove off the road, which resulted in his driving license being suspended. (He’s lucky it wasn’t worse). The variety of injuries he has suffered since I have known him is greater than the variety of more cautious people in their entire lives. I tell this friend that he’s “too brave to do it for his own good,” but really, that is too generous. My friend is not brave – he takes unnecessary risks.
Entrepreneurs are often praised as risk-takers, probably because of the variety of entrepreneurs who mix these concepts. Bill Gates was famous for saying: “To win big, sometimes you have to take big risks.” Howard Schultz instructed others to “risk more than others think is safe. Dream bigger than others think is practical.”
But as my friend and his antics show, there is a difference between risk-taking and courage – and only the latter is vital for entrepreneurs.
Risk taking and courage
There is a difference between taking risks for the thrill of it and taking risks to achieve something.
It’s true that folks tend to take risks when there’s a big reward at stake, that is a fact examined by marketing professors Derek Rucker and David Gal. It seems that although people often want to think of themselves as brave, they have an inclination to reserve risk-taking for times when significant rewards can be achieved. “Courage is not only about taking risks,” write the professors. “It is confronting fear as part of a task that is related to a higher-order goal or that is meaningful to the individual.”
I agree: my wall-jumping friend is something of an anomaly, as there was little to be gained by making this particular jump. I consider myself a relatively risk-averse person, but I also recognize that it takes courage – and quite a little bit of self-confidence – to spend time building a business when you could be doing something else.
When it comes to entrepreneurs, I agree To take IN Harvard Business Review that founders are not inherently more willing to take risks; we just define risk in another way. For some it’s a risk NO following the entrepreneurial path is someway higher than selecting the so-called safer option. This was actually true for me, especially in the way I did it. Bootstrapping has allowed me to monitor the success of my Jotform business and grow in line with market demands. I didn’t quit my day job until my startup became profitable enough to support me.
So, with all due respect to the world of Gates and Schultz, it is entirely possible to avoid risk and achieve success. In my opinion, a pragmatic approach is much more vital.
Finding balance as an entrepreneur
The decision to take a risk doesn’t have to be made on the spur of the moment – that is why there is such a thing as “calculated risk.” If you’re trying to determine whether a latest enterprise, whether it’s a startup or a product, is daring and modern or just plain silly, I like to recommend doing a SWOT evaluation.
A SWOT evaluation is a matrix identifying strengths, weaknesses, opportunities and threats, in addition to an extremely vital element in determining whether an idea or business model is feasible. We repeatedly use SWOT analyzes at Jotform to assess which products attract the most customers and use this information to determine demand for future projects.
To get the most out of your SWOT evaluation, I like to recommend focusing on the interrelationships between the 4 sections to make it easier to discover available solutions to threats and vulnerabilities. Be open to discovering latest insights that you may not have noticed by examining each quadrant individually. For example, let’s say your organization’s weakness is that your product doesn’t stand out from the competition. Competitors who clearly show how their products meet customer needs may due to this fact pose a threat. It may be the case that a critical issue in one section builds on a problem, threat, or opportunity in one other.
It’s also a good idea to set risk parameters based on experience, says Frederic Kerrest, co-founder of Okta and creator of the book Zero to IPO.
“You don’t ask someone to climb Mount Everest until they’ve climbed the hill in their own backyard,” he writes.
Determining the scale, budget, and schedule of the project will prevent it from getting uncontrolled, as will determining the circumstances under which the project should be killed.
I say this all takes courage. It’s much easier to shoot into the dark – or wall jump – and hope for the best. It is much harder and time-consuming to objectively assess the facts and take conscious actions based on the findings. Sometimes we do not get the answers we’re looking for: there may be no market for the product you’ve been dying to launch or the company you’ve dreamed of building. True courage is acknowledging reality, regrouping, and deciding where to go next.