The Entrepreneurial Savant

Expert poker players know that the way to win consistently is to fold whenever you have a hand that is weak and hang in there when your hand is strong. They also know that when you have a good hand, it gets better as more cards are on the table. Extremely successful investors also know that it is vital to have a plan to cut losses quickly and to let profitable positions ride until they run out of steam. As obvious as these tactics seem, very few humans make good poker players or successful speculators because it is our nature to hold onto losing positions until we can regain our losses. We also tend to grab profits right away instead of letting them build. The key to changing this destructive behavior lies in having a plan to control your exposure to risk.
Whatever you do for a living, it is a good idea to know the point where you will stop putting energy into a losing situation. When you make your plans, build in a set of indicators that tell you that things are not working out and that it is time to exit gracefully, accepting your small losses as an investment in experience. By doing this you’ll leave yourself the energy and resources you need to go on to other things.
Conversely, when things are going well and you have begun to profit from them, you must resist the temptation to get out while the going is good. The best time to take your winnings is after the tide has turned and your project is running out of steam or changing. Getting out too early will not put you into the black. It works like this:
Imagine you get five bad hands in a poker game or five stock market picks start going down. The person without a risk control plan will lose a little too much money on each losing situation as they hope for a turnaround, adding up to considerable losses, possibly even breaking the bank. The player with an experienced attitude towards risk gets out as soon as it is apparent that things aren’t working out, taking a small loss. On the winning side, the participant without a plan who finally gets a profitable position will usually get out too early because of the desire to ‘protect’ their winnings. The experienced player knows that he must bet the pile on the winners and stay in there, taking money away from the little profit takers and making up for all those little losses he accepted earlier. One 100% gain wipes out nine 10% losses and shows a profit. One 100 % loss puts you out of business.
The secret of risk control is to have plan and stick to it, no matter what.

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Are you surprised when things don’t turn out the way you planned?
When unexpected events turn things around in unexpected ways?
When it seems that Murphy’s Law should be named after your experiences?

It is said that entrepreneurs are risk-takers. Perhaps that’s why so many fail. Most successful people are risk-avoiders because they know that it is very difficult to make up a loss, whether a monetary one or a loss of momentum. They build in risk protection using a variety of techniques. One of the most effective is rehearsing scenarios. All this means is that they look into the future and imagine as many possible scenarios (What-if? situations) and how they would react to them. They look at how different variables could affect their plans and they make contingency plans to handle those crises and profit from them. In cases where they cannot profit, they plan ways to exit with the least amount of damage.
Perhaps you have a business dependent on one customer. What if the impossible occurs and they pull out? Rehearse your actions now and you’ll be ready ahead of time. Suppose a partner pulls out of a project or a relationship? Or your distributor goes out of business? Or you don’t get into the college you wanted? Simply rehearsing these scenarios and developing back-up plans can do a great deal to ensure your success.

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Strategy is the overall plan to achieve a goal. Tactics are the tools that are used to enact a strategy. When marketing a new product, a company develops a strategy by identifying the customer or market and determining how best to reach that market. All kinds of research is done and decisions are made about what steps are necessary to attract the attention of the market and then supply the need you have created. This overall plan is a strategy. The tactics used may be packaging, advertising, publicity, testimonials, sales training, etc.
When planning, start strategically and proceed using tactics, individually and together to create synergy.

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