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Taking Risks

Entrepreneurship is a Game of Calculated Risk

Entrepreneurship is a Game of Calculated Risk
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VIP Contributor
Entrepreneur, angel investor, self-made millionaire at 24
3 min read
Opinions expressed by Entrepreneur contributors are their own.

Is entrepreneurship worth the risk?

A lot of people seem to associate entrepreneurship with risk. You will hear friends and family mention the turnover ratio in business, or perhaps share stories of people they know who lost all their money in a failed startup. There are certainly many people who opt to not create a small business or build off their idea because they’re afraid of failure.

The risk involved with creating a startup and small business is apparent to many. But, if there is so much risk involved, who do entrepreneurs try? And is it even worth it?

The best way to approach this is by comparing a failed startup with a successful startup. When analyzing a failed start up, we can see patterns that formed: poor planning, failure to analyze the market and a lack of structure are all common traits of failed businesses.

Conversely, successful startups tend to have a lot in common: a clear goal, knowledge of the business and competitors and a strong business ethic.

In both of the scenarios, there is unavoidable risk involved. However, there is a large difference between the two businesses. The failed business took a larger risk by entering the market without a proper strategy. The successful business still had to deal with risk, but the entrepreneur behind the business took calculated risks, which are, in other words, intelligent risks.

Related: Climbing a Mountain, Whether Real or Figurative, Requires Calculated Risks

Understanding calculated risk.

When you begin to build your new business, you will hear your friends and family mention how businesses can easily fail, especially when first starting out. This is certainly true, but you can put your business in the best position to succeed by minimizing big risks and focusing on calculated risk.

Calculated risk is exactly what it sounds like. If you have a big problem in your business, you will likely have a number of options on how to approach it. Each solution will have its own set of benefits and drawbacks and it is up to you, the entrepreneur, to figure out which is going to help your business the most.

An excellent example of calculated risk is baseball. Each player can get up to bat and go for the home run play. While this works for some, it won’t work for most. Instead, players will look for individual hits that will eventually lead to scoring plays. They are taking a risk by going for smaller plays, but there is a smaller chance of them failing to convert. This type of calculated risk will win games.

Related: 3 Ways Companies Can Encourage Smart Risk Taking

Your business isn’t going to be any different. You will have opportunities for “home run” decision, and you should take them when the time is right. However, going for the home run each time a decision needs to be made can set your business up for failure, and having a larger perspective on that is one of the best things you can do. Stay focused, keep your eyes on your goal, and only take a big swing when the time is right. You’ll know when the time is right.

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