Originally published in Inc. January 3rd, 2022
At the most recent Inc. 5000 awards event, I intentionally wore a T-shirt that said: ‘Take the risk.’
Not surprisingly, many of my fellow entrepreneurs applauded my wardrobe choice. It wasn’t so much that they were casual attire fans (though they might be); it was that they could appreciate the deeper meaning of the message.
For entrepreneurs, risk comes with the territory. If you’re trying to scale your business, at some point, you’ll have to move beyond what’s safe or practical and take a leap into the unknown. Scary? Yes. Necessary? Absolutely.
When it comes down to it, taking a risk is about leaving your comfort zone. The key is knowing which risks to take on, which to avoid, and the wisdom to know the difference.
Here’s how to recognize where you fall on the risk tolerance spectrum, and the how to consider the consequences of taking risks.
You’re avoiding it completely
Recently, entrepreneur told me that he was puzzled because his business had done great in 2018, 2019, and 2020 but had leveled out in 2021. Of course, there’s always a reason behind lagging business, and suggested that he might have stopped taking risks, got a little complacent, and taken his foot off the gas pedal, coasting on his past successes. Now, granted, businesses have faced legitimate challenges (pandemic, anyone?), but why have some continued to thrive while others stagnated? The difference often comes down to risks taken or avoided.
When you become too comfortable in how you do things, you run the risk (pun intended) of becoming stuck in your ways. Risk adversity should protect you and your business, but the very thing meant to help it can sometimes prevent its growth.
You’re embracing it a little too much
On the other end of the risk tolerance spectrum are those entrepreneurs who view risk-taking as an extreme sport. Whether driven by ego or naivety, these are the folks who throw all caution to the wind and live in a make-or-break, high-stakes world where they put everything on the line regularly. It’s one thing to leave your comfort zone; it’s another to abandon it altogether, taking on too much and going too far. If you embrace every opportunity to take on more risk, you’ll likely put your finances, business, and clients in a perilous position from which you may not be able to come back. Not all risks are created equal–or worth it.
You’ve got the balance right
Those who move just beyond their comfort zone seem to have the smartest approach to balancing risk. They’re also the folks who’ve learned to be comfortable being uncomfortable by tapping into their fears and pushing themselves a bit for the payoff of higher growth.
You’ll better understand your risk tolerance as you actually take risks, though they needn’t be anxiety-inducing moves that put you over the edge. Instead, think about taking baby steps. Test out potential risks by weighing the pros and cons of each. If you find more cons than pros after this exercise, or if the cons don’t justify the risk, pass on the “opportunity.” However, if the upside of taking the risk beats the potential downside of taking (or not taking) it, go for it.
Of course, it should go without saying that, sometimes, risks look great on paper, but won’t work out in real life. The good news is that your ability to assess risk will improve with practice. Today, I’m much better at it than I was 20 years ago.
If you’re an entrepreneur, the last few years have been even more of a rollercoaster than usual. For many, 2020 was the year of the shakeup, and 2021 has been about active recovery. So, make 2022 your year to “take the risk” (albeit calculated) to scale your business.