The Business Uncertainty Principle: Mastering Risk and Reward for Entrepreneurial Success

By Serge Santos

Entrepreneurship is an exciting journey full of promise and potential, but founders often focus far too much on potential rewards – the dream of owning a successful business – while underestimating the risks that could derail their ventures before they even get started.

Understanding the trade-off between risk and reward is crucial, and that’s where the ‘Business Uncertainty Principle’ comes in.

Just like in physics, where Heisenberg’s ‘Uncertainty Principle’ states that measuring one variable precisely obscures another, as a business owner, you need to carefully weigh up the potential rewards of your next move against the risks involved. Most people want to believe that business is deterministic, governed by fixed rules and predictable outcomes, but in truth, it is inherently probabilistic—where success depends on managing uncertainty, not eliminating it.

Otherwise, overemphasising success without acknowledging potential pitfalls can lead to unpredictable consequences for your business.

The risk-reward trade-off

‘Risk’ is the probability of something bad happening, for example losing money, damaging your reputation or exhausting your personal resources. Reward, on the other hand, is the return for your efforts, such as profit, recognition or personal satisfaction.

I have seen it time and time again where entrepreneurs chase success without making a clear assessment of the risks. For example, someone might launch an ambitious startup without first making sure they have enough financial leeway to survive the early stages.

Don’t make this mistake. Hope alone isn’t a strategy, and understanding the trade-offs is key.

Setting a realistic timeframe

Another big mistake entrepreneurs make is underestimating how long they can realistically sustain themselves before their business becomes viable. Just like predicting trajectories in physics, forecasting business success involves lots of variables, and some are unpredictable.

Ask yourself: “How long can I financially survive while my business gains traction?” and “when will I need to reassess, pivot or exit?”. You should also think about which resources [money, experience, network] you have to maintain momentum.

When I first started my business, Funding Alternative Group, I knew I could self-fund it for a year before I would need revenue. This defined my roadmap and forced me to be disciplined in my decision-making, ensuring we moved swiftly towards profitability. Planning ahead made all the difference.

The art of risk mitigation

Every entrepreneur should know their breaking point. In material science, engineers test how much pressure a material can withstand before it breaks. Similarly, you need to identify your limits before a failure becomes unrecoverable.

This requires a mindset shift. Preparing for the worst frees our minds and, if you can recognise potential failure and know that you can handle the worst, you will make better decisions under pressure.

Important questions to ask yourself include: “What’s the worst-case scenario, and can I recover from it?” and “If my business fails, will I still have options to rebuild or pivot?”.

I once faced a multi-million-pound court case against a large German company. It was a major risk but after assessing the downside, I realised that even if I lost, I would still have enough savings to regroup and find a job. That knowledge gave me the confidence I needed to proceed.

Choosing the right risk-reward trade-off

Not all risks are created equal. Some risks aren’t worth taking, while others can be life-changing opportunities. Finding the right balance depends on your financial position, life stage and risk tolerance.

Take Elon Musk, for example. He didn’t start with Tesla or SpaceX, he built Zip2 first and then X.com that later merged with PayPal, securing a financial foundation before taking massive, high-stakes risks on game-changing ventures.

Speaking from my own experience, after my first multi-million-pound exit, I acquired Compressed Air Centre, a stable industrial business. This provided steady income, allowing me to later invest in riskier, high-growth ventures like Funding Alternative Group.

How to think like a business physicist

Risk and reward should always be considered together and ignoring one while focusing heavily on the other usually leads to poor decisions.

In physics, every action has a reaction and, similarly, every business decision has consequences – both positive and negative. Understanding this is essential for long-term business success.

You need to determine your financial and emotional runway before making drastic moves.

Thinking about the downside makes you more resilient, and failure isn’t the end if you prepare for it. In physics, systems are often stress-tested to understand breaking points, and you should do the same with your business and personal risk tolerance. Being mentally and financially prepared for setbacks allows you to adapt with confidence.

Your risk-reward balance evolves over time, and the risks you take early in your career may differ from the ones you take later. Just as the properties of materials change under different conditions, so does your ability to take on risk as you gain experience, financial stability and a stronger network.

Final thoughts

Mastering risk and reward means taking calculated risks, not blind leaps of faith. To achieve success in business you don’t have to avoid risk altogether, you just have to take the right risks at the right time.

By applying disciplined risk management, you can work towards your goals with confidence, making calculated decisions that maximise reward while reducing the chance of potential failure.