Greek historian Herodotus once said, “Great deeds are usually wrought at great risk.” The great company you are building will not come easy. It may require you to go “all in” (and take a prudent risk) to make it work. But what does that mean and when do you undertake such a risky action?
In poker, “all in” means betting your entire stake. It is laying all of your resources on a single event. It either pays off or you are out of the game.
The reality is that as an entrepreneur, at some point, you will need to totally commit yourself to your operation.
The question is how you interpret and handle the risk associated with such action?
Prudent risk
This is accepting the deliberate exposure to potential loss when you believe the outcome is worth the cost. The willingness to accept prudent risk is often the key to success. Prudent Risk entails evaluating both the internal and the external environment and making reasonable estimates of possible outcomes. Intentionally accepting such risk is fundamental to entrepreneurship.
Opportunities come with risks. Risk is based on uncertainty.
In order to manage risk, you must try to remove as much uncertainty as possible. This entails research, analysis and making educated assumptions. The more information you can muster and the better your assumptions, the lower the inherent risk. However, the search for the elusive key piece of information that will illuminate everything can lead to “paralysis by analysis.” At some point, you must accept that you can never know everything, and therefore, you can never eliminate all risk.
The focus should be on creating opportunities rather than simply preventing defeat—even when that course of action appears safer.Making educated estimates and intentionally accepting risk are a calculated part of entrepreneurship.
Gambling, in contrast to prudent risk taking, is staking success on a single event without duly considering the hazards and consequences should events not unfold as envisioned. Successful entrepreneurs avoid taking gambles but they are willing to take prudent risks to exploit opportunities. One of the key lessons from failure or setbacks is learning the difference.
