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Why Realists Run Better Businesses

While realism is generally viewed as a negative trait and not often mentioned in the same breath as a successful business, the truth is that they are closely linked. Positivity and ambition are essential to maintaining momentum as you build and develop a business, but so is realism. Unchecked optimism can lead to being unprepared […]

entrepreneur

While realism is generally viewed as a negative trait and not often mentioned in the same breath as a successful business, the truth is that they are closely linked. Positivity and ambition are essential to maintaining momentum as you build and develop a business, but so is realism. Unchecked optimism can lead to being unprepared for risk and mean business owners are not able to resolve problems when they come up (as they will).

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For example, business insurance can protect your company in the case of theft or natural disaster or when a person who is key to the business’s operation becomes unwell. Unfortunately, some optimistic business owners take the view that these things ‘probably’ won’t happen to them. By practising something called ‘defensive realism,’ you consider the problems you could face down the line, how you would deal with them and what the worst case scenario would be. Here are some of the most important ways realism could improve your business.

Realists Are More Likely to Listen to Feedback

It’s natural that entrepreneurs believe in their business idea, but this belief can be dangerous if they’re not open to constructive criticism and negative feedback. Taking a more pessimistic approach to your business plan and listening to feedback will help you to see weaknesses. When you accept that your business isn’t perfect, you can take action to improve it.

Realists Are Better at Identifying Problems

An optimistic person is more likely to skim over small problems or negative signals and avoid taking action in the belief that issues will somehow sort themselves out. Realists, on the other hand, are always thinking about these potential problems and, as long as they aren’t overwhelmed by negativity, will have an action plan ready. This makes them more likely to resolve problems before they grow into business critical issues.

Realists Have a More Realistic Self-image

No one is perfect. While some business owners may be excellent people managers, public speakers great at innovation and invention, others are more suited to the financial and strategic planning involved in running a business. Realists tend to have a more realistic view of where their skills lie, accept their weaknesses and can either work on improving them or delegate to more capable staff or partners.

An overly optimistic person may have an “it will all work out” attitude which can lead them into situations they are not practically or emotionally prepared for. Running a business is going to bring challenges, and sometimes you are going to make mistakes, but realists are usually better at turning these mistakes into lessons for the future.

Realists Often Make Better Analysts

Studies have shown that more optimistic CEOs are more likely to place their companies in risky situations. When making a big business decision such as whether to open new premises or launch a new product, a pessimist will weigh all the potential risks and rewards. Focusing on the negative risk rather than assuming all will work out for the best is more realistic. This does not mean that pessimistic CEOs never take a risk or are doomed to negative thinking. Instead, they can avoid poor decisions and focus resources and time into projects which are better for the business’s long-term success.

If you’ve been a little too optimistic to date and haven’t considered the risks your business could be facing, try a little healthy realism. Consider all the dangers your business faces from cyber-crime, theft, natural disaster or the loss of a key employee through injury or illness. To make sure your business is as protected as possible, compare business insurance deals today. Ambition and determination are essential, but your ambition should always be balanced by an awareness of the worst case scenario.

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Journal of Financial Economics, Volume 109, Issue 1, July 2013, Pages 103-121: Managerial attitudes and corporate actions Being a realist in business certainly has its advantages. As well as being more open to criticism, realists are able to identify and address problems with ease, and are more realistic with personal goals and endeavours. With an analytical mind, realists are also able to address concerns with their business with a level head. This could include legal and personal concerns. Therefore, if you are looking to better your business, consider a realist mindset from now on, and see where this could take you.

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