entrepreneur uncertainity

Dealing with Entrepreneurial Uncertainty

“Uncertainty is a quality to be cherished, therefore – if not for it, who would dare to undertake anything?”- Auguste de Villiers de L’Isle-Adam

We are programmed to embrace certainty and avoid uncertainty. Amygdala is the region in our brain that reacts to fear or threat. Research has shown that the same region gets triggered by the ambiguity of choices. At the same time, it leads to decreased activity in the striatal system which reacts to potential rewards. So we shun uncertainty and long for certainty. Yet, to be an entrepreneur requires acting against comfort and sailing in uncertain waters. So how do entrepreneurs do that? I believe uncertainty, for all the anxiety it brings, also places a challenge in front of us. And what can motivate us more effectively than a challenge; a definite singular entity that we must defeat to gain glory. Just as our brains are programmed to embrace certainty, our spirit is wired to take on challenges.

Uncertainties in a Business

“I can live with doubt and uncertainty and not knowing. I think it is much more interesting to live not knowing than to have answers that might be wrong. If we will only allow that, as we progress, we remain unsure, we will leave opportunities for alternatives. We will not become enthusiastic about the fact, the knowledge, the absolute truth of the day, but remain always uncertain … To make progress, one must leave the door to the unknown ajar.”- Richard P. Feynman

The U.S. Census Bureau reveals that 55% of new ventures die within the first five years. Out of the remaining ventures, 35% end during the next five years. Even companies that have gone through the prestigious Y Combinator program, one of the best incubators in Silicon Valley, failure rates are estimated to be as high as 80–90%.

The brilliance of a good entrepreneur lies in the effectiveness with which they predict risk and manage it. Smart and experienced entrepreneurs, aside from the ones that are just lucky, never play dice and leave the survival of their startups to fate. There are mainly five sources of risks an entrepreneur has to deal with to survive:

  • Financial Uncertainty: Is the capital going to last? Or have we raised too much capital too early and thus will face the pressure to scale up faster than what’s required? Have we raised capital from the “right” investors?
  • Competitive Uncertainty: Even if we have assessed the market and technology to the best of our abilities, will we reach the goal before our competitors do? Are we going to survive this battle?
  • Market Uncertainty: Is there going to be a demand for our product three years from now? Even if the demand is there, did we make the right assumptions about the size of the market?
  • Technological Uncertainty: Did we choose to develop the right technologies? Did we choose the correct platform for them?
  • Organizational Uncertainty: Does our leadership have the capability to go through with the plans? Do we have the flexibility required to react to sudden changes in the market?

How to Deal With Uncertainty

“The quality of your life is in direct proportion to the amount of uncertainty you can comfortably live with.” -Tony Robbins

No one is confident all the time and everyone has insecurities. It is a wrong notion that great people do not feel fear or uncertainty. Sometimes they doubt themselves more than a regular nobody. The difference is that they, after coming face to face with uncertainty, panic a little, worry about how it could affect their profits and tarnish their reputation or make them look like an idiot, and then they do what it takes anyway.

It is not a crime to be afraid or to feel uncertainty. You are human. I always like to think of uncertainty as an opportunity to grow, to unsettle the ground beneath my feet so that I can reshape myself to adjust to my surroundings. Think of it as a gift. Make it your ally, and you will shine.

Dealing with Uncertainty

It is the nature of human beings to evolve, to change. If you stay in one place all the time, nothing of worth is going to happen to you, unless you are extremely lucky. But in the world of entrepreneurship, you can hardly leave things to fate. Think of uncertainty as growth pain. It is something you must go through to evolve and become a better version of yourself. Embrace it.

Think of fear as an alarm. It is trying to warn you that something bad might happen. Listen to its message and don’t try to resist it. Recognize what the purpose of fear is. Once you have paid heed to its warning, do not let it persist. Prepare for the dangers that might come, and drown out the sound of fear.

Uncertainty and fear go hand in hand. If you are financially uncertain, it means you are not sure whether or not you will have enough money. It is not the certainty that there is not enough money. Think of it like this: Uncertainty itself is uncertain about the horrible outcome it is prophesizing. So it is not the same as fear, which is more of a reaction based on imminent danger. Learn the difference between the two so that you can separate them.

Use your network to your fullest advantage. Surround yourself with people you trust, love and believe in. Being well-connected comes with its rewards. Reach out to the people you can trust and learn from them.

Your early model should be simple. Starting with a complex business model can spell doom for your venture. Jeff Bezos of Amazon wanted to sell everything. But, in the beginning, he stuck to selling books since it did not require a complex business model.

Manage your expenditures. I would strongly suggest buying second-hand stuff whenever possible, or even better, get them on a lease, preferably a short-term one. Look for extra spaces in other companies that they might allow others to borrow. Maybe another company wants to get rid of excess stuff. That’s an opportunity for you to grab.

Whenever possible, convert fixed costs into variable costs. Variable cost leaves you more room for maneuver.

Experienced entrepreneurs are masters at grabbing opportunities and managing risk. To do this, they continuously keep watch on the changing business environment. But, in a startup, there is very little time for scanning. How well you react to uncertainty depends largely upon how well you have studied the environment.

Final Thoughts

“Maturity, one discovers, has everything to do with the acceptance of ‘not knowing.”- Mark Z. Danielewski

Uncertainty is a powerful force of nature that can destroy start-ups. Your actions in the face of uncertainty need to be swift and decisive. Take comfort in the fact that every small to big business you see around you started small, with a person stepping out of their comfort zone to explore the unknown.