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To evaluate the merits of their startup dream and strategize about its future, aspiring entrepreneurs can sweat out business plans and huddle with experts. To prepare for the emotional roller coaster of venturing out on their own, though, there's little to do in advance. They must launch and learn on the fly. For those struggling to decide when to launch, insight from seasoned risk-takers and researchers who study them could speed the decision-making process.
For Andrew Ullman and Hayward Majors, co-founders of New York's CollegeSolved.com, an online expert network for college admissions, taking the leap did not come easily. After hatching their idea in 2008, they kept their day jobs in corporate law and finance, conducting research and seeking industry input in their spare time. By February 2009, they had a well-researched business plan but lacked the confidence to pursue the venture full-time. "Despite having an opportunity in hand and some financial stability, it took the validation of creating a beta version of the website and raising capital from outsiders to get us comfortable with the [lifestyle] change," says Ullman.
Like countless others before them, Ullman and Majors were adept at identifying risks but hadn't learned to take them. "When it comes to taking risks, knowledge is a highly overrated motivator. Otherwise, we'd all buy low and sell high, and our kids would eat their vegetables," says Dr. Frank Murtha, a behavioral psychologist in New York City who works with traders and specializes in financial risk-taking. He suggests that seizing opportunities when they arise and rolling with the punches requires a skill set few have mastered.
In 2008 researchers at the University of Cambridge studied the risky decision-making abilities of entrepreneurs and corporate managers with similar IQs and experience levels using a battery of neurocognitive tests. They found (paywall alert) that the entrepreneurs consistently took riskier bets. The results show that risk-taking is both behavioral and physiological. The entrepreneurs not only scored higher on personality tests that measure impulsivity and flexibility; they also experienced a chemical response in the reward center of the brain that the managers did not.
While we have little control over our natural programming, it is possible to change behavior over time, as most therapists advocate. To offer aspiring entrepreneurs steps to take immediately, I compiled these tips:
Socialize with other entrepreneurs. Entrepreneurship rubs off. A study from Babson suggests that children of entrepreneurs are more likely to start businesses, as are those who know other small business owners. The inverse also holds. Risk aversion can be contagious, as Ullman and Majors experienced. "We always wanted to be entrepreneurs, but we were locked into lucrative jobs that were deemed acceptable by family and friends," says Majors. Most large cities offer business meet-ups and other networking events where like minds gather.
Set yourself up for small successes. "Our brains are motivated by success to greater success," says Dr. Richard Peterson, a psychiatrist and PhD of neuroeconomics who has written two books on financial risk-taking. Immediately after experiencing a victory, our neurons process information more effectively, we become sharper and learn faster. Set small goals, no more than three months in length. Even incorporating a hobby that sets you up for small successes can make a difference in your professional life. A personal aside: I've just given hubby the license to play World of Warcraft to sharpen his risk-taking prowess.
Have a whiskey sour. Who hasn't attended a cocktail hour feeling intimidated by a room of unfamiliar faces? A drink can stimulate the impulsive side of your brain's reward center and give you the courage to strike up a conversation. More isn't always better when it comes to playing with brain chemistry, of course. For purposes of productive impulsivity, stick to just one.
Or skip the drink and try channeling your inner Richard Branson on your own. We are groomed to seek information when making decisions. Break the habit by practicing by yourself in an environment where your decisions will have few meaningful consequences. Order what instantly comes to mind in a restaurant, for example, then graduate to other arenas.
Have faith. "As much as knowledge is overrated, religion is underrated," says Murtha. Taking a leap of faith is something every entrepreneur must do at some point or another. Having faith that everything will be O.K., whether it is derived from a spiritual belief or elsewhere, contributes to the willingness to be adaptable.
Choose a partner who possesses skills you don't. If impulsivity and adaptability aren't your strong suits, find a partner who already has what you don't. Of course, don't bring on a partner unless he or she adds value to the project beyond being able to roll with the punches.
Ullman and Majors quit their day jobs in September 2010 when it became clear investors were willing to commit. They closed the round in December, raising enough from friends and family to sustain the business for about two years, and finally launched CollegeSolved.com in early April. "After more than two years of planning, we thought we'd experience a huge relief post-launch," says Majors. "But the party is only getting started."