By Brian Tracy
You’ve probably heard it said many times that entrepreneurs and business people are risk-takers and that they should be expected to take risks, which imply losses, in the pursuit of their ﬁnancial objectives. However, quite the contrary is true. Successful business people, entrepreneurs and salespeople, as well as others, are not necessarily risk-takers. In fact, they’re more often what is called, risk-averse. They’re very astute at avoiding risks in the pursuit of their goals. It’s the people who are the most capable of taking risks where they do not lose who eventually succeed, and succeed big.
The fact is that all of life is a risk, of some kind. Whenever you engage in any action where the outcome is uncertain, for any reason, you are taking a risk. You take a small risk when you drive to work or walk across the street. You may take a large risk when you start a business or invest a sum of money. You take a risk whenever you venture into the unknown, where your possibilities and probabilities cannot be determined to an exact degree. From the time that you get up in the morning until you go to bed at night, and even when you’re sleeping, you’re dealing with risk to some degree.
The question is not whether or not you take risks, but how skillful you are, and therefore, how conﬁdent you are in taking the right risks for the right reasons in pursuit of the right goals and objectives.
It’s a fact that every great leap forward in human life begins with a giant step of faith into the unknown. Men and women who accomplish wonderful things are invariably men and women of great faith and conﬁdence in themselves and their abilities. The better you become at analyzing and assessing risk, and then avoiding as much of the risk as possible, the more competent and more capable you will become and the more successful you will be.
There are basically ﬁve types of risk for you to consider.
- The ﬁrst type is the simplest. These are risks that are not yours to take. These are decisions that you do not have to make or gambles that you do not have to engage in. Since every action has a consequence, and often creates the need for further actions, either to follow up or to remedy what happened, whenever you can delegate a risk or an act entailing uncertainty to another person, you can reduce your possible losses of time and money and can increase your likelihood of long-term success.
- The second type of risk is deﬁned by those that are unnecessary. You engage in unnecessary risks when you act precipitously, without sufﬁcient information, or without taking time to think it through carefully in advance. Peter Drucker said… Action without thinking is the cause of every failure. Many of the mistakes that you have made have occurred because you acted without thinking, that is, you acted without taking the time to minimize the risks involved.
- The third type of risk is the risk you can afford to take. Calling on a new prospect, following up on a lead, or pursuing a new opportunity, are all risks that you can afford to The cost of failure in these cases is very low while the rewards of success can be very great. Buying an inexpensive product or service, or going to a new restaurant, or going out with a new person, are all risks, entailing uncertainty that you can afford to take because the downside is limited. The worst that can happen is that you perhaps experience a little bruise to your ego.
- The fourth type of risk is the risk that you cannot afford to take. The consequences of making a mistake are too You cannot afford to bet your whole company or your whole bankroll on speculation of any kind. You cannot afford to commit all your resources to a single project and have your entire success or failure hang on the outcome of that project.
Many salespeople make the mistake of working on one very large prospect and gradually curtailing their efforts to develop a series of smaller prospects. From everything that I’ve heard, and from my own experience, whenever a salesperson does that, the large prospect always fails to materialize and the salesperson is left with empty hands and an empty pocketbook. In the world of investing, they talk about the importance of “spreading your risks.” No individual and no company should be dependent upon one or two people for their ﬁnancial well- being. One of the best ways to minimize risks is to develop alternatives to what you are currently doing. The more alternatives you have, the lower your risk, and the higher your likelihood of success.
- The ﬁfth type of risk is the risk that you cannot afford not to take. The downside may be costly, but the upside is so exciting that it’s very much worth taking a chance to go after it. If you are working on a big prospect whose headquarters is a long way from your main ofﬁce, it’s certainly a risk to travel all the way out there and back several times, but it’s a risk that you cannot afford not to take. If the prospect materializes, it can make a major difference to both you and your
Sometimes you will be given a job opportunity that you cannot afford not to take. Although there is always a potential loss involved, the up-side may be tremendous.
One of the best of all exercises, in every situation involving uncertainty, is to assess and evaluate the worst possible outcome. Ask yourself, “What could possibly go wrong in this situation?” “What is the worst possible thing that could go wrong?”
Remember Murphy’s Law, “Whatever can go wrong, will go wrong.” There are also several additions to Murphy’s Law, such as “Whatever can go wrong, will go wrong, at the worst possible time.” And, “Of all the things that can go wrong, the most expensive thing will go wrong at the worst possible time.” Another sub-law is, “Everything takes longer than your best calculation.” In advising business people, we suggest that they take their very best estimate of break-even for any business venture, and then triple it to arrive at a more realistic number. Whenever business people follow this advice, they are amazed to ﬁnd that, in spite of their best calculations, it takes about three times longer than they thought before they actually start to make money.
Another sub-law is, “Everything costs more than you can possibly anticipate in advance.” In minimizing risk in any venture, always add a ‘fudge’ factor to account for the degree of uncertainty. Whenever I do a business plan, I always add a 20 percent factor to the total of all costs that I can identify – to come up with the actually probable cost. Anything less than this, whether in business or taking a vacation, is probably an exercise in self-delusion.
Once you have identiﬁed the worst possible thing that could possibly go wrong, make a list of everything that you could possibly do to offset these negative factors. Engage in what is called, “Crisis anticipation.” Look down the road, into the future, and imagine every possible crisis that could arise as the result of changing external circumstances.
One of the characteristics of successful men and women is that they are intensely realistic. They do not trust luck. They carefully think through and calculate every possible risk and then think about what they would do, should it occur. They always have a backup plan in case things do not go as they wish them to. They have a “Plan B,” and options to that plan that take all kinds of variables into consideration.
The successful individuals engage in strategic thinking. They minimize risk by continually questioning their assumptions, and always ask themselves what they would do in the case of an unexpected delay, costs overruns or unexpected responses from their competitors. They are seldom caught unprepared because they have thought through the kind of uncertainties that create unacceptable risks, risks that they cannot afford to take, or to settle for.
In dealing with risk, a mild degree of fear or anticipation is often very helpful because it keeps you alert and aware of what might go wrong. The problem with fear is that most people have it to excess and are therefore paralyzed by their fears, rather than motivated by their opportunities.
The two most common fears that we experience are the fear of failure and the fear of rejection. These two fears, in combination, form the upper and lower limits of our comfort zones. Your natural tendency is to get into a comfort zone, an area of certainty where you feel secure. Once you get into your comfort zone, whether it’s in regard to income or occupation or relationships, you have a tendency to rationalize and justify your situation in life because the alternative is to accept risks, to face fear, and to move out boldly into the unknown.
One of the characteristics of leaders is that they are aware of the seductive influence of the comfort zone, so they are always consciously pulling themselves out of the comfort zone into the direction of fulﬁll- ing their potentials. The problem with the comfort zone and with fear is that they are both habits of mind. The more we practice, or give in to the emotion of fear, the more fearful we become and the more likely it is that we will avoid even reasonable risks that could lead us on to greater happiness and prosperity. One of your key jobs in life is to ﬁght the magnetic pull of the comfort zone and to push yourself toward the outer boundary of your possibilities by consciously confronting risk and uncertainty, even though it’s emotionally uncomfortable.
There is an old saying, “Faint heart ne’er won fair maid.” And there is another, “Nothing ventured, nothing gained.” Giving into fear makes you fearful while acting boldly makes you courageous. Your actions create your beliefs and your beliefs create your realities. The only solution is to “Do the thing you fear” each time you feel afraid or nervous for any reason. An old man once advised his grandson with these wonderful words, “Act boldly, and unseen forces will come to your aid.” Truer words were never spoken.
Most salespeople are selling far less and earning far less than is possible for them because of their exaggerated fear of rejection. Even though they have never met the prospective client or customer, they have an inordinate fear of that person, and whether or not that person will like them or approve of them. When you actually dissect the fear of rejection of strangers, it seems kind of silly, but for a salesperson faced with the need to develop new prospects, it can, and does, paralyze their activities and hold them back.
One of the very best ways to develop your ability to take intelligent risks is to consciously and deliberately do the things you fear, one step at a time. You don’t have to leap out of an airplane without a parachute. This is not risk-taking. This is simply foolish. What you do have to do is to resist your natural tendency to slip into a comfort zone of complacency and low performance, and push yourself forward. Take any fear that you may be experiencing and treat it as a challenge and as an opportunity to grow and become a better person. Face the fear, control the fear, master the fear, and continue to move forward – regardless of the fear. This is the mark of the superior person. Many of our fears of taking risks are unfounded. They have no real basis in reality. When you test them, you will ﬁnd that they don’t even exist.
Often we are afraid to take the risk of approaching a new person be-cause we fear that this person will not like us, be interested in us, or be impressed enough with us to want to have anything to do with us. How- ever, the simple solution is to get out of yourself and focus all of your attention on the other individual. When you concentrate your attention on the other person and ﬁnd reasons to like him or her, to be interested in him or her, or to be impressed by him or her, a remarkable thing happens. The other person, in turn, ﬁnds that you are likeable, interesting and impressive. And the secret is to ask questions about the other person and then to listen attentively to the answers. Men and women who are popular with others practice this all the time. They eventually ﬁnd that they have nothing to fear in introducing themselves to new people, either on a personal or business level.
If you are in sales, and you are thoroughly conversant with the beneﬁts that your product or service can bring to another person, you can ap- proach others with calmness and conﬁdence, seeing yourself as a helper rather than a salesperson. The very best salespeople, in all ﬁelds, see themselves as friends and advisors to their customers and prospective clients. They feel that they are in a position to do a favor for a person who can beneﬁt from what they have to offer. Instead of seeing risks in approaching new people, they see opportunities and possibilities. Their attitudes are positive and expectant rather than negative and reluctant. They overcome the fear of rejection by thinking and talking about ways that their product or service can help the other person and can enrich the other person’s life or work.
A very good way to overcome the fear of risk-taking is to set clear, written, measurable goals for yourself, and then to review those goals regularly.
According to the work done at Harvard, continuous motivation, which leads to a positive mental attitude, is only possible when you feel that you are growing in a direction that is important to you. And its goals that enable you to grow. So make your goals reasonably challenging. Set goals that have a 50-50 probability of success. Set goals where you can have a major impact on the outcome by applying your personality and your intelligence to the activities necessary to achieve the goals.
When you set reasonable, measurable and yet, challenging goals, and you move toward them, step-by-step, you develop a feeling of con- ﬁdence and courage that becomes the opposite of the fear of taking risks. With measurable goals, you get regular feedback on your progress which is inherently motivational. It gives you the feeling that you are progressively realizing a worthy ideal. As you do this, you feel that you are growing and fulﬁlling more of your inherent capabilities. You tend to feel wonderful about yourself.