It is often said that the best entrepreneurs take the
biggest risks to receive the biggest rewards. You may have also heard that if
an entrepreneur doesn’t take risks then they won’t be able to advance their
company’s mission. Ray Kroc, the founder of McDonald’s, has said if you’re not
a risk taker, you should get the hell out of business.[i] While there is merit in risk taking, taking
big risks can harm your team and venture.
The choice to be an entrepreneur is a huge life altering
risk. Entrepreneurs endure an uphill
battle to become successful, and a key factor in their success is the ability
to reduce company risk. The best entrepreneurs mitigate company risk, not
increase it. It’s not uncommon for entrepreneurs to take big gambles in the
early stages, but it’s best to reduce the big gambles as your venture
progresses.
Three ways to mitigate risk are; “cut expenses, shoot
bullets not cannon balls, and recruit a great team and delegate.”[ii]
Many CEOs are frugal, and believe that their cash flow is the timeline for how
long the company has; every dollar saved increases the company’s timeline. Great CEOs understand that sometimes a lot of
capital is required to move the needle forward, but they also understand the
importance of saying “No” to expensive gambles. Cutting expenses does not only
occur at the CEO level, but across the whole company. As the leader it is your responsibility to
make sure your team innovates with less. Your team may request more capital to
complete its initiatives, but you have to push back and require they produce solutions
with less. Teams thinking they need more money to create solutions, often cause
funds to be wasted. Doing more with less
can be viewed as impossible, but you and your team will be surprised at the outcomes
that can be accomplished.
Shooting bullets not cannon balls means taking small risks vs.
large risks, because “it’s never a good long-term strategy to take huge risks
that could end your company.”[iii]
Small risks are a great way to not only mitigate company risk, but they help to
validate your ideas before going all the way in. Although small, these risks are
planned. Planning enables gradual building
and continued learning of best practices.
Great entrepreneurs form teams that require little
management. These are teams that are able to run without you, this way you can
focus on maintaining a healthy work environment, raising capital, and vision.
Having an independently functioning team helps to build a stable company that
can weather any storm.
Taking risks are important, but taking huge risks that can
harm your company may need some consideration. Share your risk taking experiences in the comments
section.
[i]
Why Great Leaders Are More Risk Averse Than You Think: Are you a risk taker? It
may not be such a good thing. AJ Agrawal, October 4, 2014.
[ii]
Why Great Leaders Are More Risk Averse Than You Think: Are you a risk taker? It
may not be such a good thing. AJ Agrawal, October 4, 2014.
[iii]
Why Great Leaders Are More Risk Averse Than You Think: Are you a risk taker? It
may not be such a good thing. AJ Agrawal, October 4, 2014.
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