Are entrepreneurs risk-takers?
It is a commonly held belief that “entrepreneurs are risk-takers.”
Consider also the statement, “gamblers are risk-takers.”
Are entrepreneurs gamblers?
Or do you believe that: “Entrepreneurs calculate risk and pass it on to those who are greedy?”
Let’s research and share views on these statements.
Compulsive gambling — Almost without exception people who start companies are not gamblers.
They are attracted to situations where success is determined by personal skill rather than chance.
They strongly prefer that their destiny be determined by hard work and conscious decisions rather than by the roll of the dice [www.morebusiness.com, pdf.doc – pg, 3].
High risk-taking - Contrary to popular opinion, entrepreneurs do not take excessive risks. Through careful product and market selection, creative financing, building a good team, and thorough planning, the real risk of starting a new business can be quite low. In the world of small business, optimism is truly cheap and high risk- takers die an early death [www.morebusiness.com, pdf.doc – pg, 3].
Above shows two explanations for entrepreneurs are managed risk takers and the fact that they are not gamblers. This is the reason just because opportunities come entrepreneurs cannot jump right on it. So it is important to understand competitive market structure and product differentiation in regard to any business opportunity. Entrepreneurs can ask themselves what competencies and resources do I have in order to stay successful? Wouldn’t this question also help to identify good opportunities from bad opportunities?
Entrepreneurs are not gamblers. They do take risk similar to gamblers may take. The term risk is defined in relating to entrepreneurship is through the events of downside events of business. Entrepreneur is good steward of resources in the environment and makes moves when the risk is minimal. Entrepreneurs are careful, thoughtful business people who have studied the risk of moving forward. Also they are willing to accept responsibilities of their action.
http://forum.belmont.edu/cornwall/archives/000396.html
Myth of the Fearless Entrepreneur-
So if entrepreneurial leaders are not, by definition, big risk takers, just what is the relationship between a willingness to take risks and the long-term success of a business? There is a relationship, but it is not one you would expect. The evidence suggests that as entrepreneurial leaders become more successful, there is a tendency for them to become more risk averse[1].
The bottom line is that entrepreneurs are risk manager but rarely gamblers. They are almost always fiscally prudent, knowledgeable of the market, discerning in judgment, deliberate yet decisive in action, and realistic in calculating risk[2].
[1] http://www.time.com/time/magazine/article/0,9171,1808633,00.html
[2] http://www.cfi-institute.org/VP%20-%20Entrepreneurs%20-%20Goldsmith.html
Very good. PC
Entrepreneurs are typically extremely self-confident with a high level of energy & drive with a clear idea/plan to generate more money while understanding its role as one kind of measure of success in business. They have high but somewhat realistically achievable goals but should be ready to accept and learn from mistakes or missing the goal. Their intense competetive urge coupled with a long term vision should take them through the ever-present valleys amidst the peaks in life. Therefore, they dabble with risk constantly but are good “managers” of it similar to what Joshua said.
Innovation is many times what launches an entrepreneur, but it is more than that which sustains him/her successfully. “No matter how innovative your idea, the competition is always just behind you. With anything less than constant creative effort on your part, they may not stay behind you.”[1] Thus, they need to stay ahead of the game as visionaries and constantly represent their craft visibly to be successful!
The truly successful entrepreneur is willing to take risks. But their risks are measured, the results are evaluated - they will embrace improvement then seek even more.
[1] http://www.zeromillion.com/entrepreneurship/the-risks-of-entrepreneurship-by-john-vinturella.html
[2]
Very good,Jimy - stay on it - this is very helpful to all of us. PC
As far as passing on risk goes, the statement above suggest you have to sucker in other people to assume the possible loss/damage in the event it happens, while assuring most of the positive results will benefit you personally. As unethical & greedy as that seems in itself, that is unavoidably the case in the case of many successful tycoons in the industry who have stepped on others to get where they are today. If money alone was used to measure success, they would be at the pinnacle of it - but it doesn’t rate very high on my list as I use other parameters as well.
Also, in some cases there are other options of avoiding risk & that is to legitimately transfer it. “RISK TRANSFER means shifting the consequences of a risk to persons or organizations outside your business. The best known form of risk transfer is insurance, which is the process by which an insurance company agrees to pay an individual or organization an agreed upon sum of money for a prospective future loss.” [2] As mentioned there, Risk Avoidance, Risk Reducation, Risk Transfer & Risk Assumption are viable alternatives/options.
[2] http://www.entre-ed.org/_teach/busrisks.htm
Good observations, Jimy - that cry out for further discussion and amplification. I will check out the links…PC
Entrepreneurs must possess most characteristics of gamblers. The most succesful entrepreneurs will realize that in business just as in gambling you will have wins and losses of various magnitudes. You will never win all of the time and must learn to be a great loser in order to be a winner. A good entrepreneur unlike an addicted gambler assesses risk and only makes a bet when the opprotunity provides a win at least 51% of the time or more depending upon the entrepreneurs appetite for risk.
Entrepreneurs are absolutely risk-takers. However, the type of risk that entrepreneurs take is of a specific type, and that type is managed risk. Successful entrepreneurs are very disciplined and pragmatic about utilizing all available resources to determine if the inherent risk in their business venture is acceptable. The successful entrepreneur does not delve into a new venture blindly [1].
Gamblers are also risk-takers, but the risk a gambler takes is not calculated. The gambler will risk everything with the hope that it will pay off in the end. Gamblers often find it difficult to cut their losses. The successful entrepreneur will not hope on an outcome they will devise a plan and have strategies in place to achieve the desired outcome [2].
Entrepreneurs are not gamblers. The entrepreneur acts with purpose and is willing to review his or her plan and make changes when necessary. The gambler relies on luck.
[1] http://forum.belmont.edu/cornwall/archives/000396.html
[2] http://knowledge.smu.edu.sg/article.cfm?articleid=1165