Given the unsettled business, political and social landscapes, it’s not surprising that many of our risk tolerances have shifted in a more conservative direction. Whether that’s permanent or just temporary is still to be determined, but risk tolerance plays a huge role in how we run our businesses.
As entrepreneurs, we all have varying risk tolerances and that tolerance changes over time – even when not pandemic-driven – depending on a variety of factors. Yet have you ever taken a look into your risk tolerance? Not to mention, what drives it? If not, you should.
There tend to be three primary influences when it comes to risk tolerance.
First, how bullish are you about your business? If you’re thinking favorably about your future prospects, you’re more likely to take risks that will help grow your business. Conversely, if you have worries about the months and years ahead, your interest in risk-taking is likely to be minimal.
Second, how do you feel about what’s happening in the world these days? Optimists convinced that normality – or a new normal — is around the corner see pandemic-caused disruption as an opportunity for growth. But pessimists who believe things may still get worse (or hold course for a while) probably just want to stay hunkered down for now.
Third, where does your personal financial situation stand? Some feel a rush when they put everything on the line. More conservative folks will want to protect their assets. Plus, there are plenty of people with a diminished financial condition these days.
Remember, there are no wrong answers, so honestly ask yourself what’s driving your mindset today.
In my day-to-day dealings, I talk to a lot of business owners and recently surveyed a group about whether their risk tolerate was higher or lower now compared to before Covid-19.
The results were concerning: It seems that many of us have lost our mojo. Too many of us have become directionless.
Many of you reading this are longtime entrepreneurs who started their companies (or multiple companies) many years ago. I want you to think back to those days.
Do you remember your naïveté, determination, stubbornness and willingness to put it all on the line? Do you remember people telling you that you weren’t going to succeed – and simply ignoring them and succeeding anyway? Do you remember the long hours you put into your company to get things off the ground? Did you do things like finance the company via your personal credit card? If you did, you’re far from alone.
Some of you might long for those days again, while others are shuddering at the mere thought of that time. But whatever your emotions are now, that time was real – and vital to your current success.
The challenge we now face is to reignite the entrepreneurial flame we had when we started.
That will enable us to re-emerge better and more robust than we were before March 2020. We need to lead with the same guts and — in many cases — foolishness as when we started.
There has to be some level of risk we all take. Therefore, we have to embrace all of the unknowns and uncertainties in today’s world. We must be determined that we are right — even though, deep down, we know that we possibly might not be.
So, how do you get your mojo working again? That might require a deep inner conversation.
Or maybe you need to find a young entrepreneur to mentor. You can do that via a pitch competition found online or in your community. Go and listen and absorb the ideas and the energy.
Then offer a helping hand. Remember that students sometimes are our best teachers by reminding us of what’s important in the first place. And they often have the energy that jaded professionals lack.