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I have a friend who is constantly getting himself into trouble. He broke his ankle jumping from a high wall. He got drunk and drove his car off the road, resulting in a suspended driver’s license. (He’s lucky it wasn’t worse.) The number of injuries he’s racked up in the time I’ve known him is more than more careful people accrue in their lifetimes. I tell this friend that he’s “too brave for his own good,” but really, that’s overly generous. My friend isn’t brave — he takes unnecessary risks.
Entrepreneurs are often lauded as being risk-takers, probably because of the number of entrepreneurs who link those concepts together. Bill Gates famously said, “To win big, you sometimes have to take big risks.” Howard Schultz instructed others to “risk more than others think is safe. Dream more than others think is practical.”
But as my friend and his antics demonstrate, there’s a distinction between being a risk-taker and being brave — and only the latter is necessary for entrepreneurs.
Related: You Will Fail at Risk-Taking Unless You Follow These 5 Strategies
Risk-taking vs. bravery
There’s a difference between taking risks for the mere thrill and taking risks to achieve something.
It is true that people tend to take risks when there’s a big reward at stake, a fact researched by marketing professors Derek Rucker and David Gal. It turns out that while people often want to think of themselves as brave, they typically reserve risk-taking for times when there are significant gains to be had. “Courage is not just taking risks,” the professors write. “It is confronting fear in a task that is linked to a higher-order goal or that has meaning to the individual.”
I agree: My wall-jumping friend is something of an anomaly, as there wasn’t a lot to be gained by making that particular leap. I consider myself relatively risk-averse, but I also recognize that it takes bravery — and no small amount of self-confidence — to spend time building a business when you could be doing something else.
For entrepreneurs, I agree with a take in Harvard Business Review that founders aren’t inherently more risk-positive; we simply define risk differently. For some, the risk of not pursuing an entrepreneurial path is somehow greater than taking the so-called safer option. That was certainly true for me, especially the way I went about it. Bootstrapping allowed me to monitor the success of my business, Jotform, and grow in accordance with the demands of the market. I didn’t quit my day job until my startup became profitable enough to sustain me.
So with all due respect to the Gates’s and Schultz’s of the world, it is entirely possible to be both risk-averse and successful. Far more important, in my opinion, is being pragmatic.
Finding the balance as an entrepreneur
Deciding to take a risk doesn’t have to be spur-of-the-moment — that’s why there’s such a thing as a “calculated risk.” If you’re trying to decide whether a new venture, be it a startup or a product, is bold and innovative or just downright foolish, I recommend performing a SWOT analysis.
A SWOT analysis is a matrix that lays out strengths, weaknesses, opportunities and threats, and it’s a critically important component of determining whether an idea or business model is viable. We regularly use SWOT analyses at Jotform to assess which products are attracting the most customers and use that information to determine demand for future projects.
To make the most of your SWOT, I advise focusing on the interplay between the four sections, so you can more easily identify the available solutions for threats and weaknesses. Be open to discovering new insights you may not have noticed if you’d analyzed each quadrant on its own. Say, for example, that a weakness of your company is that your product is undifferentiated from the competition. A threat, then, could be competitors that make clear how their products meet customer needs. It may be that a critical issue in one section is built on a problem, threat or opportunity in another.
Related: You Have to Take Risks to Succeed. Here Are 4 Risk-Taking Benefits in Entrepreneurship
It’s also a good idea to establish parameters for risk based on experience, says Frederic Kerrest, Okta co-founder and author of Zero to IPO.
“You’re not going to ask someone to climb Mount Everest before they’ve summited a hill in their own backyard,” he writes.
Determining a project’s scale, budget and timeline will keep it from spinning out of control, as will defining circumstances under which the project should be killed.
I would argue that all of this takes bravery. It’s much easier to shoot into the dark — or jump off the wall — and hope for the best. It’s much harder and labor-intensive to assess the facts in a clear-eyed manner and take informed action based on your findings. Sometimes, we don’t get the answers we want: There may not be a market for the product you’ve been dying to launch or the company you’ve dreamed of building. True bravery is acknowledging reality, regrouping and deciding where to go next.
