How Much Risk Should Entrepreneurs Really Take?

3 Ways to Launch Your Business Without Betting the Farm

This is a guest post by Jeff Goins. His newest book, Real Artists Don’t Starve: Timeless Strategies for Thriving in the New Creative Age, is now available for preorder.

When it comes to chasing a dream, is it better to go “all in” or take your time? Despite the age-old claims that we need to risk everything, the truth is taking a leap is not always the best path to create your life’s work.

Most of us love a good tale of risk and reward. We get a thrill seeing people bet big and win. But a study from the University of Wisconsin demonstrates this is not wise.

Big Bets Lead to Bigger Losses

In 1994, a pair of researchers named Joseph Raffiee and Jie Feng set out to measure the success rate of business owners who stayed at their day jobs and started a business on the side versus those who quit their jobs to jump straight into full-time entrepreneurship.

For fourteen years, they followed the trajectories of five thousand American entrepreneurs, and what they discovered was surprising. The more cautious entrepreneurs who did not quit their jobs were 33 percent more likely to succeed, whereas the “risk-takers” were far more likely to fail. In other words, it doesn’t pay to bet big.

But doesn’t this fly in the face of everything we’ve heard about entrepreneurship and chasing our dreams? It turns out that in the real world, the tortoise beats the hare. Slow and steady really does win the race. And this applies to a lot more than just business. Whether you’re launching a dream, writing a book, or getting into shape, most significant change starts with a step, not a leap.

A friend of mine learned this when he quit his corporate job to become a full-time writer. He had some savings but not much of a business started. Still, he was tired of his day job and decided take the leap and go all in. He figured having the extra time on his hands to pursue his passion would be worth the risk. It turns out he was wrong. After six months, he had run out of savings, and less than a year later, he was back at a day job, working for someone else.

My friend chased his dream the way we think it must be done—which is to say, impulsively—and his dream failed, as many do. But did it have to fail? Maybe not. Let’s look at what one of the world’s most successful authors learned when he launched his own career.

The Baby Step Strategy

As a new father and lawyer, John Grisham woke up early every morning, went to his office, and wrote a page of his novel. That was his goal. One page per day for 365 days. It took three years, but by the end of that time, he had completed the manuscript for his first book, A Time to Kill.

The book would eventually go on to be a bestseller, one of many to follow, and in the process Grisham would invent a new genre—the legal thriller. Soon, he would become one of the world’s most successful authors, but he did not do this by betting big.

Grisham became a writer by stealing away a little time each day, thirty minutes to an hour a day. That was it. With a growing family and a new career, it would have been reckless to quit law and become a full-time author.

In fact, that wasn’t even his goal; he was just writing to see if he could do it. He took one step at a time, and three years later he had a book. It wasn’t until he was two bestsellers in to his writing career that he left his law practice to pursue writing full time. That’s the art of the small bet.

3 Steps to Launch Your Creative Dream

What do we learn from this? As an author and entrepreneur, I consistently run into other creatives with big dreams who think they either have to starve for their art or become an overnight success, and neither are true.

At the same time, we can’t stand still. We have to move. So here are three actions you can take today to move you in the direction of your dreams:

  1. Believe you have what it takes. When I began my career as a writer, I interviewed Steven Pressfield and asked, “When does a writer get to call himself a writer?” He said, “You are when you say you are.” For me, this meant I had to start thinking like a professional if I wanted others to take me seriously. Success always begins in the mind.

  2. Behave as if it’s true. Like Grisham, when I decided I wanted to be a writer, that meant getting up every day and treating my hobby like a job. I wasn’t quitting my job or taking a giant leap. I was just taking one small step in the right direction. Frequent small steps beat occasional big leaps every time.

  3. Become your dream. Over time, these steps add up. The process may take years, but a slow and steady strategy almost always outperforms the big bet. Before you know it, you are no longer dreaming of being a writer or an entrepreneur or an artist. You have become your dream.

Sure, some may risk it all and end up winning, but those are the exceptions, not the rule. When I was interviewing hundreds of creative entrepreneurs and full-time artists for my latest book, Real Artists Don’t Starve, I noticed most did not quit their jobs at first. Instead, they built their dream slowly on the side. And because they took their time, it lasted.

The first step to launching a big dream is just that—a step, not a leap. Small changes over time lead to massive transformation. You can do extraordinary things when you are patiently persistent.

Question: Do you know people who took a huge leap instead of patiently pursuing their passions on the side? How did it turn out?