photo courtesy Loic Leray upon unsplash
How much risk can you handle?
Entrepreneurship is not for everyone.
No shame here. I’ve seen the best ideas fail because entrepreneurs couldn’t bear the burden, the hardships, and the heartache when their businesses didn’t go according to plan. 100% of my clients are entrepreneurs and still the wild, wild west of large commercial real estate developments. I have seen fortunes made and fortunes lost.
The 12 questions in this article don’t just apply to real estate. They apply to technology, private equity, venture capital, or other industries.
Answer these questions honestly. Success or failure can depend on your ability to take risks.
Risk is the price you pay
In 2009, I started a commercial real estate investment banking and investment business. It is the culmination of many years of experience working with entrepreneurial and institutional firms. I have worked for companies large and small, private and public, and navigated economic ups and downs.
I concluded that to be successful as an entrepreneur, you need to be a little different, and I mean it in a good way. The most successful entrepreneurs I’ve worked with have their quirks. They are not easy to get along with, nor are they easy to talk to.
Entrepreneurs are visionaries, seeing their own futures that other people don’t see. Risk is just the price you have to pay to realize your vision.
Now it’s time for a gut check. How much risk are you willing to take to realize your entrepreneurial dreams?
Do you know your risk appetite?
Risk is relative. One person’s thrill is another person’s heart attack.
Shortly after starting my business, I advised a developer to close a large construction loan for a new hotel. I drove home from the closing dinner with the senior vice president of the landlord.
Greg, I couldn’t be like you. You take so many risks. Your income depends entirely on your success.
I was honestly stunned and almost laughed out loud. dangerous,I thought, But you bear all the risks, you work for the guy. Your boss may wake up on the other side of the bed and fire you. Your employment depends on a cookie-cutter product that you have no control over. You have no say in your time, as the boss layer above you tells you how high to jump. Besides, your bank is the target of a hijack!
Whereas he saw risk and uncertainty, I saw my business in a completely different light.
- Spread my risk through employment by multiple clients.
- Navigate market fluctuations by agilely adjusting our products and services.
- Select assignments and clients that offer the highest return on effort.
- Spend your time efficiently without the burden of unnecessary meetings and politics.
- Work with partners and colleagues who love working together.
- We provide the highest level of service without short-term profitability pressure.
- Enjoy unlimited earning potential not controlled by the man behind the curtain.
- Generate income and wealth through both advisory and real estate investment businesses.
Should I take more risks? I didn’t think so!
How much risk can you handle?
So how do you know if you’re ready to take the risk of becoming an entrepreneur?
You need to understand the time, effort, stress and investment required to be successful. You have to wake up every morning in complete fear of failing. You need an unquenchable fire in your belly to face the unexpected battles that threaten to blow your dreams away.
Entrepreneurs are entrepreneurs because they can withstand all kinds of risks. Here are some big ones:
- Finance: The risk of losing your investment and potentially the investor’s money if the business fails. I have seen many clients go through both corporate and personal bankruptcy.
- Personal: Starting and managing a business can be stressful. It negatively affects your mental, physical and mental health.
- Relating: Entrepreneurship takes time. It’s not a 9 to 5 job. Business hours and stress can negatively affect marriages, families, and social relationships.
- Emotional: Entrepreneurship can be very complacent and self-destructive because it tends to tie its success to its identity. Failure can lead to depression and deterioration.
- reputation: Failure or lack of success can damage your image within the industry and your standing within your personal and social circles.
- market: Competitive and economic cycles can quickly affect demand and profitability for products and services.
- Operation: Human resource, supply chain, regulatory, marketing and equipment risks can be difficult to predict and costly to correct.
- legal: You can expect to be sued by customers, employees, and competitors for unexpected reasons.
Don’t be an entrepreneur if you’re comfortable and happy playing in a neat little sandbox with little risk to yourself, and you’re not willing to handle those risks.
12 questions to ask yourself before taking the plunge
When you dream big as an entrepreneur, don’t just think about the rewards. Think about risk. Entrepreneurship is not something you do by default. That’s the path you chose because that’s what you intend to do. It’s what you wanted all along. It is what gives energy and excitement to your life.
You can have the best business plan and the most favorable market conditions, but if you can’t take the risks of starting and running a new business, you’re probably going to fail. Ask yourself.
- Are you 100% committed to the success of your new business?
- Are you willing to sacrifice aspects of your personal life, such as your marriage, family time, or social relationships?
- How long can you live without making money?
- Can I invest in my business when cash is not coming in?
- How much of your savings and net worth are you willing to lose before you pull the plug?
- Does my family understand the risks I am taking and will they support me when the unexpected happens?
- How do you react when the economy or markets move unexpectedly?
- Do you understand the market, financial, operational and legal risks you may face and do you have plans in place to mitigate those risks?
- Are you willing to risk your ego by asking potential clients and investors for support, business, and money?
- Do you have a support system in place if the results don’t go as planned?
- Am I mentally, physically, and mentally prepared to handle the pressure to risk it all?
- If my business is unsuccessful, am I willing to handle the professional and industry implications?
Summarize
Running your own business is one of the most fun and rewarding things you’ll ever do. But getting out on your own and taking risks isn’t for the faint of heart. Nothing goes according to plan, so you have to hope for the best and plan for the worst.
You will have many sleepless nights. There will be many mornings when you wake up with your heart pounding. There are many days when you want to throw in the towel.
The ability to take and carry risks is what drives entrepreneurial success. It’s a superpower that propels you forward and helps you stay on course.
So think about the risks you take and plan accordingly. And make sure you have the financial, emotional, and physical strength to weather the uncertainty and setbacks.
Finally, I would like to encourage the Roman poet Virgil.
“audentes Fortuna iuvat.”
Fortune favors the bold.
