It’s not uncommon to hear the advice that entrepreneurs should take more calculated risks if they want to be successful. In fact, some billionaires have built their personal brands on a foundation of risk; as an example, Richard Branson often speaks of the risks he took when he was young, and he encourages up-and-comers to do the same.
Taking risks, in fact, can be a beneficial way to separate yourself from the pack. If the fear of failure is holding back your peers, your willingness to take a risk could give you an open, uncontested opportunity. In addition, risky decisions offer valuable lessons, regardless of whether you succeed or fail.
But does risk-taking, in general, lead to success? The answer depends on the following factors:
The importance of “calculated” risk-taking
First, it’s important to note that open risk-taking generally isn’t productive. Instead, successful entrepreneurs tend to take risks in ways that limit their potential losses. As Leonard C. Green pointed out, in Entrepreneur, “Entrepreneurs are not risk-takers. They are calculated risk takers.
“The difference between risk-takers and calculated risk-takers is the difference between failure and success,” Green said.
In other words, calculated risk-takers might not play a game of roulette, because the odds are against them, yet they might be open to playing blackjack because it’s possible in that game to tip the odds in your favor through strategic play.
Smart entrepreneurs also find ways to mitigate risks, whether that means purchasing insurance, protecting their websites from hackers or conducting a risk-assessment of their businesses.