How To Make Difficult Decisions About Risk

how to make difficult decisions

How To make Difficult Decisions When Your Aversion To Risk is The Problem

how to make difficult decisions

The SFM Video series – mindset and marketing

How to make difficult decisions is a thorny problem. Is your aversion to risk holding you back? You know its good, you know you should but something’s stopping you from committing the funds. Why is that? It’s probably aversion to risk, which like so many things in life is actually a mindset problem. If you are an entrepreneur – more likely a fairly new one (more experienced entrepreneurs have worked on this already) this is a problem. So what’s are the real stakes? How do you deal with your risk averse mindset?

I was wrestling with this problem yesterday myself so hope my thoughts on this are useful to you. It’s something I’ve got better at over time and it’s still good to be a little cautious but as many wise men have said – no risk – no gain. Learning how to make difficult decisions wisely is just a process.

If you’ve decided to take the plunge and start a business you’ll find yourself in a strange and sometimes scary place. You are now in charge of your income and outgoings. You make all the decisions and you have to build a whole new decision making process. You need to escape from the employee mentality. To be fair though you probably had to learn how to make difficult decisions as an employee – its just that the buck probably didn’t stop at you.

How To Make Difficult Decisions – Working On Your Mindset 

how to make difficult decisionsThe employee mentality is based on a set, regular income. You know what you have in the bank and you know how often and by how much it’s going to increase or decrease in the course of a week or month.

With your own business, especially in the early days you probably don’t have that luxury. If you are smart you have a financial buffer – a pot of savings – in place. As that pot starts to dwindle (and it will) your mindset is going to throw you some curves. Sooner rather than later you need to work out how to make difficult decisions and how to make them work for you.

Your old employee mindset, which is closely related to the way poor people think, is going tell you this: “I must make those savings last as long as possible” and “I must spend as little as possible to achieve that”. Your new mindset needs to be saying: “I need to invest that money wisely to grow the business” and “How can I make the money I have work for me”.

Think of it this way. If you know deep down that you need to spend money on something that’s going to be a huge benefit to your business in the longer term, what happens if you don’t? What happens is that the funds dwindle anyway. Unforeseen expenses come up, shit happens. Eventually you’ll get to a point where the funds are no longer there. Now what? Now you have less options when it comes to working out to make difficult decisions about investment.

How To Make Difficult Decisions That Work For You

You took a decision like this when you first went into business. Future investment into that business needs to be looked at the same way. You need to be committed to that business fully. Think about how you came to the difficult decision to go out on your own. What research you did, what finally made you take the plunge.

Apply the same process to any investment you are looking at and you won’t go far wrong. Entrepreneurs need to see money as an asset rather than an enemy. It’s not something that needs to be hoarded, not a “rainy day” fund. If it’s not working for you its actually not much use.

I’d also suggest that’s its very important to have mentors and supportive people around you can bounce things from. I’m lucky to have that with the private business community I’m part of. Partly because we are all in the same industry and a lot of the things we invest in are the same so we can benefit from each others experience. Getting comfortable with an investment decision is so much easier if you can talk to someone about how the same investment worked for them. Wrestling with how to make difficult decisions is definitely easier when you can talk to someone who has already made them.

Find Out More About The SFM and DEA Entrepreneurs Community

Find Out More About The SFM and DEA Entrepreneurs Community

How To make Difficult Decisions – Addressing Your Aversion To Risk 

By Dave Menzies

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