How To Take Better Risks For Entrepreneurial Success
Kevin Zhang shares his top keys to risk-taking, failure and entrepreneurial success
The greater the risk, the greater the reward.
It’s an adage we’ve all heard one thousand times over, it’s something that someone along the line has whispered to us as we debate making a move, switching careers, or chasing down a goal that frightens us.
Like other sayings, this platitude exists as a widely known cliché for a reason. Because likely, in some way, it’s going to ring true. This is especially impactful when it comes to the topic of entrepreneurial endeavors.
Risk has long been considered the secret ingredient to entrepreneurial success. Many of the most successful entrepreneurs actually credit their willingness to take risks as the fundamental reason behind their success. Mark Cuban, one of the most infamous entrepreneurs, acknowledges that taking risks is a crucial component in a thriving business despite the fact that he’s terrified of risk.
Life’s intricacies often make this much less black and white than illustrated, but even so, one glimmer of reality remains: entrepreneurship and risk are more than entangled, they’re one and the same. This is often referred to as a risk-return tradeoff, a process by which potential return rises with an increase in risk. This principle is a key part of entrepreneurship: investing more money and time into an idea can render higher profits, but this requires accepting a higher possibility of losses.
Undoubtedly, the two are part of the same complicated, but rewarding dance, you typically cannot have one without the other.
At least, this is exactly the reality that Kevin Zhang came to terms with as a young entrepreneur.
Though he began chasing his vision at 23 with little-to-no capital, he’s now a successful, serial entrepreneur, the owner and founder of a global business that successfully sold products to hundreds of thousands of customers and employed 50-plus team members around the world.
Zhang could quite literally be called the poster child of entrepreneurial success, and it all began with highly-focused determination, a dash of luck and naturally, an inclination to do what that adage tells us: take the big risk, reap the great reward.
Taking risks as a part of entrepreneurial success
When Zhang appeared on the entrepreneurial scene at the age of 23, he didn’t bring with him the coveted tool that many other youthful, determined entrepreneurs often do: capital.
While Zhang didn’t have access to business capital or connections, for that matter, he took a risk and set out to kickstarting an entrepreneurial career. Then he added another, larger risk to the mix—he chose to turn down a high-paying offer at a top management consulting firm, move back home into his parent’s basement, and pursue what he believed to be the future, e-commerce. He first dove headfirst into an e-commerce brand that sold women’s purses. It failed miserably. He lost thousands of dollars, valuable time, and endless energy, all poured into his first project that quickly came to a screeching halt.
All of the risk he’d taken on for his entrepreneurial dream might have seemed heavy, but Zhang’s next step wasn’t to slink out of the entrepreneurial world defeated and soured on the experience, a risk he knowingly took. But then, he took another risk—a bigger risk—ditched the concept of getting lucky, and invested in something he knew was worth the risk; the idea that his passion needed to pick the project and the firm reality that understanding the customers was crucial.
“Too many aspiring entrepreneurs, especially in e-commerce, are obsessed with getting lucky,” Zhang said. “Finding that viral concept/product or market that fits the right factors—yes, those things can be important, but they’ll never replace the importance of personal interest in and understanding of the products that you’re selling. I always tell my students that in every single niche they can think of, there is an entrepreneur that is making money and another one that is failing. Stop hunting for the pot of gold under the rainbow and pursue something you’re actually interested in. It’s not going to be easy either way, so you may as well enjoy the process.”
One year later, Zhang generated 8-figures in sales, built a massive remote team of 50-plus employees around the world, and developed his signature “Branded Niche eCommerce” (BNE) approach which he has since shared with thousands of students through his e-commerce incubation program. BNE is a unique approach Zhang adopted based on the philosophy that strong brands focus on comprehensively addressing the needs and desires of a specific audience—this is accomplished by serving customers that often get overlooked by big box brands and retailers. E-commerce niches are small segments of an industry that sell a specific type of product with a unique differentiator, like Dollar Shave Club, Warby Parker, Allbirds, and other similar companies.
Not unlike Zhang, other big-time entrepreneurs believe that risk is a key part of the entrepreneurial process. Oftentimes, failure is part of the process. Jeff Bezos, CEO and founder of Amazon, has been quoted saying taking risks is crucial to make waves and find success.
“We take risks all the time, we talk about failure,” he said during a Business Insider interview. "We need big failures in order to move the needle. If we don't, we're not swinging enough. You really should be swinging hard, and you will fail, but that's okay."
In Bezos’ case, the risk was worth it. He founded Amazon in 1995 with 10 employees. Since this time, he’s turned it into one of the most valuable public companies with a worth of over $1.7 trillion. Bezos himself is worth close to $200 billion.
Risk and entrepreneurial reward? You typically can’t have one without the other.
Does risk-taking really point to entrepreneurial success?
Though we’re often taught that adage we keep bringing up (risk=reward), we’re also told from a young age that risk is synonymous with something bad, or rather, something we shouldn’t be doing at all.
But the concept of risk is tricky—it’s not as one-dimensional as we might think, especially when it comes to entrepreneurial business endeavors.
When Zhang opted to quit his job, turn down a high-paying salary, and pour all of his energy into an industry in which he had no connections or capital, he took something called a calculated risk.
Zhang isn’t what we’d classify as a regular old risk-taker; as a serial entrepreneur, he’s a calculated risk-taker. As an article from Entrepreneur.com puts it, the difference between a calculated risk-taker is that they’d likely avoid a game of roulette, because they know the odds are against them, but they’d be pretty open to playing blackjack because they understand that if they’re strategic enough, they can tip the odds in their favor.
But why does risk-taking often go hand-in-hand with entrepreneurial success? To put it simply, because risk can help an entrepreneur stir the pot, make a change, and insert yourself into a minority group of risk-takers—naturally, most people are risk-averse.
Inherently, risk involves uncertainty and change—if you’re choosing risk, you’re choosing to shake things off, and this is likely because you’re unsatisfied with your current level of success. Those who take risks are more open to growth, advancement, and to seeking success. With the normal redefined for citizens and business alike, the risk factors are further subjective.
This isn’t to say that taking risks is easy. As humans, we’re hardwired to consider risk as dangerous and it often makes us feel anxious, stressed, and out of sorts. But the willingness to take risks can do several things for entrepreneurs—it can present new opportunities, it can minimize the competition you face, and it can even make you happier.
As an entrepreneur, risks are part of the game you’ve decided to play. Risks—calculated risks, anyway—are necessary. Of course, calculated risk comes with some stipulations. Embracing risk as part of the entrepreneurial process doesn’t mean tossing your capital to the wind, going with your gut, and blindly risking everything you’ve worked for.
Take a lesson from Zhang. Know your odds, know how to maximize your chances, and if the calculated risk is worth it—take it.