Running a business is exciting. Whether you are a wild-eyed entrepreneur or a mild mannered CEO, there's always the unexpected and unanticipated waiting for you around every corner.
Every business decision has an element of risk to it. Especially the big decisions you have to make as the leader of your company.
Dan Kennedy in No BS Business Success said this about risk and decision making:
"The true entrepreneur prefers to be adventurous and "fail forward" all the time. Running a business is a risk, but it needn't be foolhardy. I rarely make a decision without considering everything from the best-case scenario to the worst-case scenario. I try to expect the best and insure against the worst."
I love his point about expecting the best… but insuring against the worst. It's kind of like buying insurance against certain risks.
Wise Decision Making
One of the largest mistakes I have seen entrepreneurs make over my 30 years in business is the tendency to make big decisions without thinking through the likely outcomes – both positive and negative.
Making relatively small decisions that way is fine. But that approach can kill you when you are making big decisions. It can create harm that is out of proportion to the intended benefit.
With decisions, your insurance policy is the time that you and your management team put into talking through all the possible outcomes. Then constructing some plan B or plan C scenarios about how you will deal with those outcomes should they happen.
It's not being a pessimist. It's increasing the likelihood that you succeed. That's smart.
Same concept applies when you are taking on debt to fund a project or a purchase. You want to make sure you are using debt without getting your head cut off.
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