I’ve had the pleasure of meeting many people with entrepreneurial ideas who have acted on their dreams and others who merely talk – failing to ever launch. When I wrote From Idea to Exit: The Entrepreneurial Journey I challenged myself to answer one question. Why do some people successfully act on their ideas and visions while most others fail to do so? I’ve had the opportunity to test my thesis through mentoring and advising entrepreneurs over the years, and most recently, I’ve applied my theory to myself in launching two new digital startups. I was pleased, and a bit ashamed, to find that the theory held up.
The answer to my question is held within an individual’s Risk Box, a phrase I coined to describe the personal forces that dictate whether an individual will take on the risk to start a new venture. However, before I introduce the Risk Box, I’ll point out the three most common outcomes of the Risk Box’s influence that halt “would-be” entrepreneurs dead in their tracks.
1. The Opportunity Cost
Many people boil down their decision to follow an idea based on irrelevant income comparisons. That is, they feel compelled to fully step into a business venture only when they can feel certain that they can make the same amount of money that they are making today. Now there could be some merit to this in terms of personal financial budgets needing to be met, but for the most part this is purely psychological. People mentally are averse or afraid to take a step back. Many who fail to launch want to be on a continually rising level of income and are unable to see that a momentary step back may help them make a quantum leap forward.
2. All or nothing
Many people feel that attempting entrepreneurship is an all or nothing decision. The term “Go for it” to them means you have to risk everything you have on your new venture – money, possessions, relationships. This is so far from the truth for most entrepreneurs and a reflection of poor planning for those who do choose to risk it all. You have to start with the resources you have or can acquire, and ration those resources to maintain both your personal and professional lives. Many would argue that “risking” everything your business has on one idea would be foolish as failure could sink the business. The same is true of the individual risking everything he has on one idea to start a business. The trick is mitigating the risk and expense.
3. The next Google
Too often, entrepreneurial dreamers equate entrepreneurism with the Innovative Entrepreneur. This is the entrepreneur who creates the next Google or Apple. [Entrepreneurial dreamers] feel they have to come up with truly innovative ideas for products or services that are completely new and revolutionary. However, the vast majority of entrepreneurs are considered Replicative, and they produce slight variations of existing business models, products and services. In fact, most successful business owners get their starts from their previous employers. They learn a particular business or industry and then “replicate” the business model with a slight or significant twist. That twist is what creates their niche or uniqueness.
So what’s this Risk Box? You can think of it as an open box where an individual deposits everything she values in her life. Those “things” can be represented in whole by the four walls of the box. The walls are a person’s: Possessions, Position, Health and Age. These four things become the core determinants that block a person from taking action or sway him to take action to become an entrepreneur. Oddly, none of them correlate to the validity of the business concept. It is these four aspects of a person’s life that are valued and protected by the Risk Box. The more a person’s attachment to them and fear of losing them grows, the thicker the Risk Box walls grow. The thicker the walls, the less tolerance for risk.
Test yourself on your next idea. Analyze why you are not “going for it.” Does it boil down to one of the walls of your Risk Box? I bet it does.