May 12, 2023
Read time: 3:42 minutes
Have you ever taken a HUGE risk or made a big bet on something?
For many of us, the idea of "risk" is scary.
After all, the word risk represents all of the crappy downside of a decision gone wrong.
But on the other side of risk is the upside! The glorious pot of gold at the end of the rainbow. That pot of gold being the metaphor for our big goals and dreams.
As the saying goes: No risk, no reward.
Someone recently told me that I take bigger, bolder risks than anyone they've ever met.
I guess it might seem like that...
I have:
• Left the military
• Left the multi-6 figure salary job
• Started a CFO firm before they really existed
• Decided to host a 6-figure overhead conference for fractional CFOs when there had never been one before in the history of the world
I can see why most people might consider those moves "risky".
But I never saw any of them as risky at all!
Plus, those "risks" are the exact things that have led to so much happiness and opportunity in my life.
Unfortunately, so many people take a flawed approach to risk analysis. The result?
The pot of gold is always just out of reach.
MOST PEOPLE DON'T TAKE RISKS BECAUSE THEY OVERESTIMATE THE DOWNSIDE
The number one reason people don't take risks is because they overestimate the downside.
But they also:
Struggle to see a clear path to success
Assume they'll be doing it on their own
Don't connect the activity to their larger goals
How have I been able to take such big risks?
Today, I'm going to share my approach to risk analysis and how I apply it to making bold decisions.
Step 1: Emotionally disconnect from the downside
Start by sitting down with a pen and paper.
Take a deep breath.
And then asking yourself "what is the TRUE worst case scenario of making this decision?"
I apply my analytical, fractional CFO brain here.
The exercise of writing it out helps me to be less emotional.
Admittedly, this is easier said than done, especially if you haven't done it before.
I ask myself questions like:
How much money will I be out?
How much time will I have lost?
How long will that pain last?
How much jeopardy will "failure" truly put my family in?
Here's a real life example:
When I considered leaving my last full time job to start my firm, there was some fear. The move felt VERY risky.
My thought process looked like this...
• $500 give or take to start the business
• I'd need to give it 6-8 months to really know if it was working or not
• I had no debt and a decent emergency fund in the bank
• I had already proven I could find clients on UpWork, so there was some money coming in and I knew I could find more
I realized that if I got 6 months into it with no luck, the worst-case scenario would look like this:
• $150k in lost salary from a W-2 gig
• Emergency fund low, but not depleted
• I'd still have my work experience and my MBA
• I'd have new experiences and lessons which would make me more marketable when I look for my next job
I rolled the dice.
And here we are today.
Step 2: Evaluate the Network
When was the last time you evaluated a risky decision and asked yourself "who do I know that has done this and could help me if I do it?"
I find that most people don't.
I think we subconsciously assume we'll be doing it on our own.
And what a missed opportunity that is!
Most of us have a network of incredible people that would be honored to help us get started.
Don't think that's true?
If someone who was coming behind you in their journey asked you for help, I bet I know how you'd respond...
Here's a real life example:
I wanted to host the first-ever conference for fractional CFOs.
(Hello, CFO Accelerator LIVE!)
I knew a total of 2 things about hosting a conference:
They are REALLY expensive
I had never done anything like it.
But I knew a guy that had done SEVEN of them!
I reached out and asked if he'd mentor me.
He was THRILLED to help me out.
He's shown me how to do it and how to offset the crazy costs.
Step 3: Review Opportunity Costs
Reviewing opportunity costs are a great check and balance.
In other words:
If I decide to do this thing, what am I simultaneously giving up?
I consider:
Time
Money
Energy
Relationships
Mental bandwidth
As a financial guy, I'm usually pretty good at estimating the opportunity cost of money.
I typically underestimate how much time something will take. Which results in underestimating the opportunity cost of time with that decision.
And I almost always underestimate how much mental bandwidth is required. In other words, how much of my brain's resources will I have to allocate to get it across the finish line.
Mental bandwidth is a precious resource.
You only have so much at any given time.
Step 4: Is it a North Star No-Brainer?
I run every big bet through the filter of my North Star.
In other words, I ask if that decision aligns with my personal goals, my business goals, and my calling.
Sometimes the first 3 steps of the process produce a "yes, do it!" response.
But then I ask myself if the decision aligns with what my family or my business or my calling is moving toward.
Let it be an easy yes or an easy no at this point.
When it comes down to it, this is more art than science.
And I appreciate that everyone's risk tolerance is different.
But remember this:
When it comes to making big bets and bold moves, you're not really betting on the thing.
You're betting on yourself.
And that's normally the safest bet you can make.
Your coach,
Michael
Ps. If you're looking for expert guidance on your journey to starting, scaling, and optimizing your fractional CFO firm, that I want you to check out The Inner Circle.
The Inner Circle is my monthly group coaching program where I go live and share the tools, perspectives, hacks, and everything that I've learned in my journey over the last seven years of scaling my firm.
The best part about it is you can check it out risk free for 30 days. You literally have nothing to lose and you can cancel at any time. If you're ready to accelerate your journey, join now!
