Risk Taker or Risky?

There’s a lot of talk out there about how entrepreneurs are ‘risk takers’. This is true. We are a unique bunch who will sacrifice it all in pursuit of a better life. Our unshakable belief in our own success makes us appear arrogant and reckless to outsiders.

However, in reality, successful entrepreneurs only take on very smart, calculated “risks”.  You see, there is a distinct difference between taking a risk, and acting in a risky manner.

Here’s an example of the two;

Dice, taking chancesScenario #1 –A neighbor comes to you looking for an investment for their new business. They provide you with a complete, detailed business plan. You review with them the market research and see that there is a potential market for their idea. You discuss the financials, they know how much money they need, where the money will be spent, and can forecast a return on your investment.

They’ve spoken with industry professionals and have lined up the necessary help they’ll need in getting their business started. You can see that a lot of thought, time and planning has gone into this business already. You decide to invest.

Is it a risk? Of course. There is a chance you may never see your money again, but there is also a chance you’ll make your money back ten-fold in the coming years.

Scenario #2- A friend comes to you with a great business idea. They just KNOW it will be a success because there are already 10 other big companies making gobs of money on the same idea. They’re sure the market is there, because if it wasn’t these other 10 companies would be failing, right? Their idea is a sure thing. They need your money to travel, so they can visit with potential clients and pitch their idea. You’re welcome to come along too – it’ll be a blast.

 They assure you this idea will succeed because they’ve heard the saying, “Do what you love, and the money will follow”. They love traveling and taking clients to expensive dinners, so this idea is surefire. You figure, “What the heck? No risk, no reward”. So you invest.

The latter happens all the time. It’s easy to start daydreaming about how much money can be made – easily. But this is a risky deal. The idea of “risk taking” isn’t license to make foolish decisions under the guise of being an entrepreneur.

Be careful with your money. Get all the facts before deciding to invest, or start a business. You need to feel confident that the investment is a good one, and not just a 50/50 shot.

The saying is true, and one of my favorites; “No risk, no reward”.  Just remember, your risks shouldn’t be based on luck, but rather planning and hard work.