Every entrepreneur faces the decision. The moment of commitment to a new venture. We strategize, research, analyze the data, interview experts, interview peers, study competition, study alternatives, build sensitivity analysis, build a scenario analysis, develop probability weighted outcomes, etc. The list of research and analysis goes on seemingly forever…
But at some point in time, every single entrepreneur faces the go/no-go decision. The point at which they commit to a course to invest their resources and get going. At this point, no one knows what the outcome of the decision will be. We’ve done our best at predicting the future based on our research and analysis prior to the decision, but the truth is no one can predict the result.
So how does an entrepreneur make a go/no go decision in a system of imperfect information and unpredictable outcomes? I think there are four fundamental elements that have more importance to the entrepreneur at the point of go/no-go than others:
1) Probability: A probabilistic view of the outcomes resulting from a decision needs to be carefully thought through. Probability gives us an idea of the range of outcomes, but never certainty. Even low probability outcomes can result, even success beyond planned expectations. The academy award nominated movie, The Big Short, is a good example of this. The probability of systemic defaults in the US housing market was a low and had never happened in history, yet it still did.
2) Options: Having options should your primary expectation not play out is key. Options yield alternatives, alternatives lower the risk associated with a decision.
3) Judgement: We’ve all spent our lifetimes building our base of judgement. Judgement helps you place a filter on the probabilistic outcomes. Judgement is also influenced by our personal risk profiles. Listen to your judgement.
4) Passion: This is the Entrepreneur’s gut check. Do you have passion for the expected result of your decision? Do you have enough passion to give you the resolve to work through situations in the future where things don’t go as planned? Passion is what gives the entrepreneur the resolve and ingenuity to deal with unexpected/unplanned challenges. It’s a certainty that all entrepreneurs deal with them.
I remember vividly my gut check moment when founding SafeSplash Swim School. My business partner and co-founder sat in my office and we stared at each other for a couple minutes. He said to me, “its gut check time…nothing more to analyze or negotiate, are we doing this or not?” It was at that point that my passion for the project took over. The numbers were important, but it was passion that drove my response. I turned to him and said, “Hell yes. Let’s do it and see what happens.” We haven’t looked back and have built an international leader in the market.
I sincerely hope everyone is able to experience the excitement of their own “Gut check moment” at some point in their life.
Matt Lane is the co-founder of SafeSplash Brands, the largest and fastest growing swim school brand group in North America.