How An Entrepreneur Is A Risk Taker
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If you follow the media you know that "risk" has been a big topic lately.
If you read the headlines about young founders who have gone down in flames - the things they did wrong, the bad advice they received, and the wrong turns they took. You'll quickly learn that there is some truth in it.
The reality is that if you are building a company with any kind of seriousness, the risk factors will be there from the beginning. However, often people believe that it is only in the early stages of a project that you can claim to be taking a risk.
Yes, that's true - when you're just developing a concept. But to take a risk in the early stages of the project is to ignore the significant differences between developing a startup idea and building a marketable and profitable company.
If you were an engineer at Google, and you managed to find one million people to buy into your product, then you didn't take a risk - you just executed really well. If your service had 30% annual growth with a 40% customer retention rate - you did not take a risk, you just executed really well.
But, the fact that you found customers to buy your product makes you a "risk taker".
You're a risk taker when you've proven the concept of your product or service to be successful and have an opportunity to go out and build a company.
That's when you start talking about taking risks.
To be more specific:
If you're running a company that is building a new market that hasn't been yet discovered, then you're taking a risk, since there isn't anyone in that market today. If you've identified a problem that doesn't exist and has the ability to solve a significant problem in the market, then you are taking a risk.
But, the question is not about how much you're taking of a risk - the real question is: What's the difference between an entrepreneur and a risk taker?
If you don't understand what I mean, read through the rest of this article.
Entrepreneurs & risk-takers
So what is it that distinguishes entrepreneurs and risk-takers? To answer that question, I want to share some of my own thoughts with you.
First, entrepreneurs are always looking for new ideas, as opposed to "traditional" risk takers who often have a narrow and tried and true set of ideas that they have repeated and used a number of times.
Think about it:
A risk-taker is more likely to do the same thing over and over, without ever changing. An entrepreneur is most likely to say "Hey, you know what? What if we did...".
An entrepreneur will make decisions based on his or her gut, not his or her head. A risk-taker is most likely to do things the traditional way.
Most entrepreneurs - regardless of their background - started off thinking about an idea or seeing a problem. They came up with a way to solve that problem, or fixed it in some way.
That person probably never even thought about "making a billion dollars". They probably had other short-term goals, but these weren't the long-term goals.
They made a lot of mistakes in their early days - but by and large they were successful at making the business they started.
That's not to say that entrepreneurs don't take risks. Far from it - they're just less likely to.
The purpose of entrepreneurs is to build an idea that can lead to a business. The business is built on customer relationships, opportunity for expansion, recurring revenue and community.
The businesses that succeed, as far as we know, are built around the qualities of people and the qualities of business - especially customer relationships.
Entrepreneurs do this because they care. That's why we started off talking about risk-taking. If your primary goal is making a ton of money, then you're a risk-taker.
If your goal is building a profitable business that people will want to support, you're an entrepreneur.
Entrepreneurs take more risk. This is one of the biggest differences between entrepreneurs and risk-takers.
Some of the best businesses we've built, and which I'm most proud of, are the result of taking small risks:
Guru - Now a multi-million dollar business - we launched a product on Kickstarter called Pocket Gyrometer in 2013. We didn't have any money in the bank - it was a risk. If we'd missed our goal, we were toast.
But we didn't miss our goal and the product sold like crazy.
Katmandu - Our first great success was making four necklaces that sold for $25 each. In our first year, we sold over 1.5 million necklaces, at $30 a piece.
That's not a lot of money, but it's a lot of product. And that means we took a risk, and we found out we could sell a lot of products for the price we wanted.
And these are just the examples I can think of off the top of my head. We've built multiple businesses this way, and many others have done it successfully.
I don't mean to minimize the risk of entrepreneurs. Far from it. Take the example of having that meeting in the woods with my mother and Tony