Are You Risky Enough? Finding Your Risk Tolerance In Business

kelowna accountant business riskThe thing about risk is that it’s always different for everyone. You hear about risk and risk/reward all the time, that’s pretty common. You know that old mantra, the higher the risk, the greater the reward.

In general, that’s probably right but it’s calculated risk that really matters.

I met with the client yesterday that’s looking to buy a property. When you look at the project itself, it’s a reasonably good project, the numbers work and the location is great. The only hiccup is this particular individual is what I would call risk adverse.

Profiling A Risk Adverse Individual

Someone who is risk adverse tends to focus on the negatives related to purchasing, rather than the positives. What happens if I can’t find a tenant? What happens if I can’t sell it when I need to sell it? What happens if I don’t have enough time to do the renovations?

They are constantly putting the negative spin on the project and that’s fine, except for the fact that anyone can always find a way to convince themselves not to do something.

If you sit down long enough, you can analyze anything so far that you will eventually talk yourself out of it because everything inherently has negatives and everything has an element of risk. If you always convince yourself that the negatives outweigh the positives, you’ll never do anything.

Weigh The Pros & Cons

When a client of mine is struggling to make a decision, I resort to an old and reliable method that has rarely, if ever, let me down. I tell them to take the negatives and positives and write them both down on a piece of paper so you can easily weigh the risks against each other.

The reason why get people to write them down is because if you think about them in your head all you’ll think about is the negative. If I tell you to not think about the pink elephant, what’s the first thing that goes straight to your head?

Putting it on paper and writing it down it gets it out of your brain and allows you get to better analyze it in a logical way. Keeping everything inside your head will have you eventually pushing yourself out of a project before ever giving a chance to move forward.

Taking Risks Is Being An Entrepreneur

I personally believe that there is a risk reward model and if you don’t take any risks, the chances are excellent that you won’t ever be rewarded. Many people always say that want to be the next Bill Gates or Steve Jobs.

Well, both Bill Gates and Steve Jobs walked out of university and trail blazed in an area that no one else saw any true value in. Those were big risks but they came with very substantial rewards because of it. There were obviously a lot of steps along the way and it all depended on follow through but it all started with taking that first risk.

It’s about pursuing that risk reward over comfortably choosing something just because it is easy. We really have to be careful that we don’t always take the easy route because if you do, you won’t get ahead in the world, let alone business.

 

 

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