As a business owner, it’s important to develop a sense of when to take risks and when to play things safe. Knowing how much risk to take on, when and where, is a balancing act. Without risk, little growth can happen. But risk inherently comes with the chance of something going wrong.
Especially when things are going well for us, it can be difficult to take a step out on the ledge or put anything you care about in harm’s way for the sake of possible gain. Taking risks requires bravery, and we each have different levels of comfort with risk.
Often the best things in life happen because we take risks. I want you to think back to some of your greatest successes, proudest achievements, and happiest days. What led to those moments? Would they have happened if you hadn’t been willing to take a risk?
The craziest thing I’ve ever done was when I met my wife. We met the day before Valentine’s Day in 1999. A month and a half later, on April Fool’s Day of the same year, I came home and jokingly said, “Let’s go get married.”
She half-jokingly said yes, so we drove to the Justice of the Peace. We hesitated slightly, wondering if we should really do it. There wasn’t any alcohol involved. But we went ahead and got married. We’ve been married 23 years and have three amazing children.
That was one of the best risks I’ve ever taken. Sometimes the universe speaks to you, and you have to just listen to it, even though it might seem crazy. My intuition told me I was making the right choice.
Intuition is a great tool in an entrepreneur’s skillset. It’s something we have to learn to listen to and hone over time. If you’ve been in business for many years, you may find that you know the right answers to things and understand which risks to take without needing to think too much about them—that’s intuition. It’s the knowledge of your subconscious from the experiences you’ve built up over the years telling you what you know is right, even if you don’t consciously know the reasons.
But if you haven’t developed a strong sense of intuition, or if you want to strengthen the intuition you do have, where do you start? While the subconscious can certainly seem nebulous, understanding yourself well can help you make conscious decisions that are not led astray by emotions like fear, which is often present when it comes to risk.
There are two main aspects to your relationship with risk: appetite and tolerance. Risk appetite describes how much risk you’re willing to take on, while risk tolerance describes the amount of risk you can afford to take on.
Generally, it’s best for your risk appetite and tolerance to be well-balanced. For example, if you’re someone with a low risk appetite but a high tolerance, you may be able to afford to lose quite a bit but have to desire to risk anything or be afraid to take a risk at all. This can lead to lost opportunities. On the other end, someone with a high risk appetite but low risk tolerance might take risks they can’t afford and lose too much.
Do you have a high or low risk appetite? Of course, it can vary depending on the kind of risk and what’s at stake: money, time, reputation, relationships, or something else. If you have plenty of time, you may be willing to risk spending a lot of it on something that may or may not pan out while you wouldn’t be willing to spend as much money doing the same. That makes sense, because it’s balanced. But sometimes our ideas of what’s at stake can be warped and make us unwilling to take risks that could lead to great opportunities.
When confronted with an opportunity that puts something you care about at stake, what’s your immediate reaction? Do you freeze up? Do you back away? Or does it excite you? Understanding how you generally react to risk can help you control your emotions so you can better listen to your intuition. If you know you have a low risk appetite, carefully consider your tolerance level—what’s at stake for you? If the opportunity didn’t work the way you intended, could you salvage the situation or recover?
Many of the best things in life require some level of risk. Getting married requires risk—though usually not as much as my spontaneous wedding. Having children is also a risk. And every entrepreneur knows that there is plenty of risk inherent in running a business. But unless you’re willing to push past fear, listen to your intuition, and assess the situation with an understanding of what’s at stake, you’ll miss many of the best opportunities. Risk is inherently uncomfortable, but often it takes discomfort to reach your goals.
What’s the biggest risk you’ve ever taken? Where did it get you? Chances are you wouldn’t be where you are today without some major risks. Keep that in mind the next time your intuition tells you to seize an opportunity. While not every risk you take will work out the way you want it to, if you avoid taking any, you’ll also avoid some of your biggest possible successes.