Entrepreneurialism: not such risky business

Anyone who starts their own business, by the very act, earns the reputation as a risk-taker: often turning their back on a comfy salary to pursue little more than a pipe dream, often against the advice of their friends, family and bank managers.

Entrepreneurs, then, are often seen as embracing risk, something that in most people's lives represents danger not opportunity.

However, this is where the assumption of the entrepreneur as a risk-taker falls down: as the judgement is made through someone else's eyes. The smart business owner will have a different perception, not because they're crazed risk-takers, but because they've invested time and energy converting what to everyone else is a blind risk into a calculated risk.

See I don't think entrepreneurs are necessarily risk-takers in the true daredevil sense at all - far from it. Sure, there are the naive, novice start-ups who become so absorbed by their ideas they lose all sense of judgement, but most entrepreneurs are actually quite averse to pure risk. They don't take chances, they don't gamble, they'd never 'bet the farm'.

Instead they seek opportunity and are prepared to take calculated risks - and that's a huge difference. With a blind risk you have no control over the probability of the outcome turning in your favour. It's a 'close your eyes and see how it falls', scenario.

With a calculated risk, you control as much of the outcome and contributing factors as possible until you're convinced the odds are firmly in your favour, the upside firmly outweighs the downside and any negative outcome can be absorbed.

What does that mean in real terms? That smart entrepreneurs don't start businesses, invest in new opportunities, switch suppliers, launch new ranges or spend serious money on advertising - all the kind of things outsiders might consider 'risky' decisions - without researching, planning, testing and measuring the possible outcomes until any risk is diminished significantly.

These are the skills and practices preached in business books, sites such as Smarta and from accomplished entrepreneurs - indeed, if you look at it, business people are surrounded by the message to 'reduce risk'.

It's no surprise then that most become more risk averse the more experienced they become (and mistakes they make and learn from).  It's why our heavyweight established entrepreneurs are always urging caution and rarely seem like risk-takers. You could argue this is a negative, and indeed, becoming too hesitant and risk-averse is surely one of the reasons many entrepreneurs' second companies lack the verve of their first and are traditionally less disruptive.

Even if you examine the most boundary-pushing entrepreneur of all, Sir Richard Branson, his space race with Virgin Galactic is countered by solid advance sales, huge brand awareness value and a core portfolio safely secured in the rather less glamorous but more lucrative financial services.

Entrepreneurs: risk-takers? Nah. Only the foolish.

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