The Formula to Balance Your Business
Opportunity & risk.
Gains & losses.
Promotion & Prevention.
These are all ways to describe the balance a business needs to succeed. You can’t avoid risk, and you – hopefully – have plenty of opportunities. Making these two things coexist is important, but one of the hardest things to do.
Back in 2017, I read an eye-opening piece in the Harvard Business Review about the different questions that VCs tend to ask male versus female entrepreneurs. The conclusion was that:
They tended to ask men questions about the potential for gains and women about the potential for losses. We found evidence of this bias with both male and female VCs.
This was eye-opening for several reasons, of course.
And one thing it did was make me reflect on how I think about my own business?
Was I always considering the correct balance of risk and opportunity?
The lesson from VCs
The problem with the line of questioning outlined above is twofold.
First of all: it will only ever give a part of the information. This means that any subsequent decision is not a fully informed decision.
Second: it sets the situation up for either success or failure.
Talking about the opportunity will always sound exciting. Talking about risk will always sound ominous.
With the former, anybody would come out of the conversation seeing only upside potential. In the latter situation, it is all doom and gloom.
See the table with example questions: the prevention questions put the speaker on the defensive at every step, whereas the promotion questions expect the speaker to dream big and aspire to success.
How to use it
Use both sets of questions.
One set is not better than the other. They need each other.
Gains and Losses
I have often said that every decision a business makes must incur some gain, and will certainly incur a loss. Indeed I developed a whole course on decision making around this premise.
When you make a change in your business, outline all the probable losses you will incur. And list all the expected gains you intend.
This balance will keep your business level-headed.
Balancing Risk with Opportunity in Business
If you are a
- Business Owner
- Department head
- Unit Manager
- Decision marker in Business
Then the decisions you make must address both the business opportunity and the business risk.
Take this course to learn how to analyze your strategic plans.