FAQs for Step 14: Discover Your Assumptions
Q: Don’t entrepreneurs rely on an amount of gut instinct? Could you explain the difference between assumptions and intuition?
Yes, we all rely on gut instinct. And we all take certain risks. It used to be said that entrepreneurs are risk takers. That’s true, but it’s also true that 95% of new businesses fail within the first 5 years. The 5% that succeed are either dang lucky or they somehow discovered the real key to success, which is to find a healthy balance between risk management and risk taking. One of the cornerstones to becoming an effective risk manager is to find a healthy balance between your intuition and due diligence. Due diligence is the research needed to validate your hunches, it’s your homework. Our entrepreneurial folklore is jammed with romantic stories of entrepreneurs who latched onto a “hunch,” followed it, and somehow magically struck gold. In fact, some of our folklore is laced with stories of the handful of gold miners who struck it rich. The less visible backdrop to illustrious gold miner image is the graveyards full of the pitiable sots who didn’t make it, who died in awful conditions at young ages. With the similarly illustrious and iconic image of the successful entrepreneur, singlehandedly mastering the waves of the marketplace to whip the crap out of risk, armed only with hunches and a lot of bravado, that same backdrop is missing – the graveyards of bankruptcies, broken families and destitution that comes with a business failure. Don’t be duped by the hype. If you’re feeling intuitive and lucky, buy a lottery ticket. If you want to build a successful business, by all means follow your hunches, but do your homework by validating your assumptions before putting any significant investment on the line.
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