Simple Risk-Aversion Test to See if You can Make it as an Entrepreneur

Often I meet people who tell me about their dreams to start their own business. They don’t want to work for the man all their lives. They ask me what it takes to start your own business.

It’s a difficult question to answer because there are so many elements to being an entrepreneur. First, you need to be passionate about something. It has to be in your core. For many immigrants, they are passionate about their children and providing an opportunity for the next generation that they themselves never had. That drives many to amazing accomplishments. For others, the passion is about green energy, mobile technology, global health issues, and so forth.

Entrepreneurs also need a good support network of family and friends because owning your own business is not easy. It’s extremely time-consuming and emotionally draining.

Another very important component is the right personality. An entrepreneur cannot be risk-averse. In the type of businesses I’ve been involved with, I hire many very bright individuals with great business ideas. Some of them want to start their own businesses, and I know they have the intelligence and skills to be successful entrepreneurs. Yet, they lack the personality to actually be entrepreneurs. They are too risk-averse. And that’s fine because they can have fulfilling and financially rewarding careers within the corporate environment.

One time, a friend who is successfully climbing up the partner latter of a prestiguous consultancy asked me about entrepreneurship. I could tell he was thinking about possibly doing something on his own. Then, one night while driving together he started to panic because the gas gauge needle had just started touching the red empty mark. I laughed, and told him that making partner at his firm is a fantastic goal for him.

Since then, I’ve used that example with others who ask me about entrepreneurship. And a few have smiled and admitted they would panic as well. Entrepreneurship is not for everyone. Unfortunately many find out after an unsuccessful venture. Just do the “am I comfortable running on empty test” first.

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6 Comments on “Simple Risk-Aversion Test to See if You can Make it as an Entrepreneur”

  1. Shane Rai
    November 20, 2009 at 4:21 pm #

    I think I know who that person is :) Nice, short and sweet blog post that forces to re-look at some of the fundamental traits needed in entrepreneurship and re-evaluate one’s fit with that lifestyle. Golden nuggets of information, John. Keep ‘em coming in your blogs :)

  2. Jiawen
    November 20, 2009 at 4:46 pm #

    Yup, you have to be a little “crazy” to be an entrepreneur! :)

  3. meetjohnsong
    November 20, 2009 at 5:29 pm #

    Shane: Thanks :). And Jiawen is right. I actually love it when I’m squeezing in 19.9 gallons into my 20 gallon tank. That means I was on the edge!

  4. Ask This CFO
    November 20, 2009 at 6:23 pm #

    You read my mind! Of all those who answer the call of entrepreneurship, most fail. But why is that? What is it about some entrepreneurs that make them successful? What is their recipe for success?

    Before embarking on your journey of self-employment ask yourself the tough question. Do you have what it takes? It is true: only about 30% of startups survive after the five-year mark. Perhaps the two most common reasons for this are that entrepreneurs tend to lack the necessary skills to execute their idea and that they grossly underestimate the capital and resources needed for the startup to be successful.

    Ask yourself, why are you starting a new venture? Don’t be afraid to be aggressive, as long as you remain realistic. Be specific and consistent, in what you want. In terms of money, are you trying to realize your earning potential by taking matters boldly into your own hands? Or are you sick of corporate downsizing? Do you simply want more of the pie to replace what you’ve lost or supplement what you already have? Now, let us not forget perhaps the most important echelon of pursuits: personal goals. What drives you? Do you thrive on freedom, flexibility, and security, or are you looking for recognition, job satisfaction, and a chance for professional growth? It could simply be a change of career or particular retirement goals that drive you. No matter what your reasons for self-employment are the pertinent question still remains.

    Do you have what it takes? ….

    Check out my blog on a similar thread http://askthiscfo.wordpress.com

  5. China Law
    November 21, 2009 at 9:07 am #

    Great test! I started my own company and I actually enjoy trying to see how far I can go on a low tank. One of my most conservative friends (who works for big healthcare) told me that ever since he was a young child, he has worried so much about running out of gas, he always tries to re-fill the tank before it even gets half full. He would (both truly and admittedly) make a terrible entrepreneur.

    I am going to start using this test on people.

  6. meetjohnsong
    November 22, 2009 at 12:21 am #

    China Law: Thanks for sharing and best wishes on your venture. Yes, it’s kind of fun to use the test. Of course, there are many other factors that determine whether someone will be a successful entrepreneur. But then, you knew that alread being one yourself.

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