If you decide to share your radical product or a risky project with the world, you may want to make sure that you don’t lose everything.
Capping the loss and maximizing the wins
What is the maximum loss you can make if you launch that product?
What is the worst earning you can make?
If your ratio if 1:1, you will lose everything if you lose once.
Richard Branson is famous for the 5:1 rule.
Every time he invests, he ensures, he only loses a 5th of the earning potential.
This way, he can lose 5 times before burning through his initial investment.
A known example is when he created the Virgin airline. He bought a plane from Boeing. And he negotiated to return the plane at no cost if the business failed.
And the rest is history. Boeing didn’t make a bad investment either since Virgin thrived and expanded.
Ask yourself: what is the worst that could happen?
Now, it is often hard to measure the potential for earnings, but it is certainly easier to list your potential losses. What is the worst that could happen?
By asking this question, you will find a wide array of potential causes for failure.
Once you have a list of potential failures, you can match them with mitigation scenarios: if this happens, what can I do to limit the impact, or remove this risk altogether?
Let’s move forward
Now that you have a list of potential failures, a solution to mitigate the risk of each failure, calculated the profits you can make, it is time to move forward with the project or decide that is not worth your time.
You went from a stage of uncertainty to a stage of certainty. And that is the difference between risky and managed risks. You can make the right decision for you.