According to Ram Charan, a highly acclaimed business advisor, speaker, and author who has coached some of the world’s most successful CEOs, you should work to anticipate the consequences of your risk. Pretty standard advice on the surface, but scratching deeper, you need to have a clear understanding of your situation and be able to identify the risks, whilst being able to think through the potential consequences of any decision you make. Ask yourself what could go wrong under various scenarios, both internally and externally, and then evaluate the potential effects and magnitude of the reaction to your decisions and analyse how to put your entrepreneur skills to work to minimize the risk.

Every time you take a risk, there are untested assumptions at play. When Henry Ford decided, in the early 20th century, to pay his workers $5 per day, it was more than double the industry standard. He based his decision on the simple belief that if his workers were paid a decent wage, they would become his customers. Had his judgment been wrong, the decision could have backfired and done irreparable damage to Ford’s finances.

Before you put your assumptions into action, think about what will happen if they prove incorrect. What if a key project leader leaves the organization, for instance, or if the engineers can’t make the technological breakthrough you’re counting on? Can your entrepreneur skills get you out of trouble or will you have to rely on help from others?

On the external side, consider what would happen if interest rates rise. What if there’s political unrest, a natural disaster, or a shortage of essential raw materials? What will your competitors most likely do? The more broadly you think, the fewer surprises you’ll encounter, and you will find out quickly that the more prepared you are, the luckier you will be. Your entrepreneur skills need to encompass an understanding of all of the possible consequences of your decisions and actions and the more you can take responsibility for them the more you will be able to take control of your future.

Reading about business is essential to your growth as an entrepreneur.  A good mindset to cultivate is one of being able to learn new things as quickly as possible, and adapt to as many different situations as fast and intelligently as possible. Entrepreneur skills are acquired and then need to be honed.

Studying up on other business successes is essential to grow one’s knowledge of life and recognize possibilities and opportunities. Ram Charan is a highly acclaimed business advisor, speaker, and author who has coached some of the world’s most successful CEOs. For 35 years, he’s worked behind the scenes at companies like GE, Bank of America, DuPont, Home Depot, 3M, and Verizon.

Charan started his business career as a teenager working in his family’s shoe shop in India. He went on to earn an engineering degree and then an MBA and doctorate in corporate governance from Harvard Business School. His impressive academic career spanned 30 years and he didn’t stop there. He wrote several books and is a successful entrepreneur in his own right.

Not surprisingly, he gets bombarded with questions regarding approaches to business. Some people argue that taking great risks is essential to the growth of their business, and that venture capitalists love aggressive ideas. His opinion is that although successful businesses have been built by business owners taking great risks, truly smart business minds use their entrepreneur skills to accurately measure the risk versus the potential benefit in order to make a balanced decision. Henry Ford, Richard Branson, or Rupert Murdoch, all made bold decisions with uncertain outcomes, but they made a sharp distinction between risk-taking and gambling.