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Don’t take crazy risks

  • By Alan Knott-Craig
  • December 18, 2016

entrepreneur-risk

 

“Jump off the cliff and build wings on the way down,” is advice from fools for fools.

 

Only suckers and scions take unmitigated risk.

 

If you’re a sucker, sorry for you. If you’re a scion (rich parents, rich spouse), well done for winning the lottery and having a safety net.

 

Most people don’t have a safety net. Which means most people need to be planning very carefully to mitigate their risks when embarking on an entrepreneurial journey.

 

Remember Warren Buffett’s golden rules:

 

Rule 1: Never lose money.

Rule 2: Never forget rule 1.

 

Before starting a business, make sure you have a deal in place which covers your downside.

 

That sounds a tad difficult. How on earth are you supposed to ensure that when you flip a coin, heads: you win, tails: someone else loses?

 

No one said being an entrepreneur is easy. True magic only happens when you’ve mastered the art of creative thinking. Of innovating. Of deal-making. Of ensuring you have a safety net before you take the plunge.

 

An entrepreneur figures out a way to mitigate his downside, so even if the upside doesn’t materialize, he isn’t left as a red splat on the pavement.

 

Next time someone tells you to risk everything, add him to the list of people to ignore.