One of the defining traits of entrepreneurship is risk and one of the, more important, factors believed to determine success in businesses is the propensity to take risk.
The only way you can do away with uncertainty in entrepreneurship is to engage in crony capitalism – which is a thing in these parts of the world, unfortunately. In your business, it’s important to list down the risks your business faces and what you intend to do to mitigate them.
Otherwise, there’s a good chance that you could make a costly error in strategy or tactic. Maybe the market doesn’t grow as quick or as big as you projected or you’re forced to change how you operate by new technology and competitors. Perhaps the Government pulls an uncalled for compliance directive from its magic hat.
This environment of uncertainty is a problem, more so, for women who are entrepreneurs and those aiming to be. It is perceived that women entrepreneurs are less risk tolerant. This influences propensity to become an opportunity-driven businessperson. These types enjoy more success, when compared to those who start a business as a last resort.
When you become an entrepreneur, you’re gambling for a big payoff. One thing that needs to be accepted is that, for many entrepreneurs in Kenya, the capacity to take risks is hindered by lack of finance.
On one hand, you need money to make things happen. If you don’t have that money, you have to downsize your dreams. That’s pretty awful. You should follow our #HerDiary series to see how becoming a manufacturer in Kenya is such a hurdle.
Secondly, you need room to make errors for you to become a risk-taker. If not so, you will quickly descend into, “undergraduates in Kenya should cook chapatis by the road side and not choose jobs.” This is a silly suggestion by the way, considering the amounts of money we all sink into getting educated. Without a safety net, most of us will not be confident enough to take big gambles in the name of business.
Women entrepreneurs in Kenya say there is a bias against them, compared to men, when seeking financing from either investors or financial institutions. It is why they own 50% of MSMEs but do not come close to this figure when it comes to accessing credit. You can see how this would influence ability to stomach risks.
A new way to look at risk
A corporate body and a learning institution in Canada teamed up to do some study (we can only dream). They wanted to get to the bottom of this business of women, risk and entrepreneurship. They arrived at interesting conclusions on what risk is and how we should be looking at it, in the first place.
The study argues that we should not judge entrepreneurship by how much risk is made. Risk is only a process, not a goal. This is because we use deductive reasoning or the top-down approach to judge successful businesses. If a less risk-averse individual does well, we say risk is the greatest thing. There’s no lab to test the actual traits needed for business success.
This is prone to survival bias, though. Entrepreneurs are confident people and only focus on the success stories when tailoring their idea. “The entrepreneur believes that he is right, while everyone else is wrong.” You have to admit that this is a bit crazy considering almost half of new businesses in Kenya fail.
The study also says we must open our minds more on this. I believe their findings are relevant even here.
It was found that women entrepreneurs will prefer stability and therefore look to increase profits at the same level rather than grow the business. Besides this personal trait, the issue of considering perceptional factors was also raised.
For example, you’ll find that our needs for achievement, autonomy and our competitiveness levels are different. These could have more effect on you, as an entrepreneur, than how less or more risk averse you are.
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