Risk / Reward Ratio
Achieve a Reasonable balance
Another way to state this law is by asking the question: “How much pain am I willing to accept if things go bad; if things go well, how much pleasure do I want to gain?”
We need to consider the risk / reward principle from two perspectives.
The first is through the eyes of your client or customer. How can you reduce the risk for the customer, thereby increasing the likelihood of them doing business with you? Jay Abraham deals with this concept of risk reversal and shows how successful businesses remove as many barriers as possible.
Today’s savvy business people offer the strongest guarantees they can afford to minimize the client’s risk. They offer bonus incentives, and provide exceptional value.
The second is to ask the same question from your perspective: How can you reduce your risk from doing business with this potential client while increasing your reward?
For example, a real estate agent wouldn’t dream of wasting a lot of time with a home buyer who has such bad credit that he cannot possibly get a loan. A mortgage broker pre-qualifies the potential buyer’s cash, credit, income, and debt limitations to determine if and what kind of a mortgage can be obtained. Only then does your sophisticated agent invest his time in showing affordable properties to a buyer.
Minimize your risk and maximize your reward for stellar earnings
Apply This Concept
A closely related maxim is the "opportunity cost" of your time and resources. This theory says it best: "What else could I be doing with my time and money? " If your money or your time is tied up in low yielding activities, you are simply not getting the best results you can. Risk and reward would not be complete without considering the "odds" or probability of a result. Long shots sometimes pay off, but smaller, yet consistent results that you can rely upon are easier to build a business upon. As in baseball, try to hit many singles and doubles. When the set up is right and you get the perfect pitch: hit it out of the park.Laws of Wealth
