Optimism vs. Realism: Which Breeds More Entrepreneurial Success?


Optimism Optimism Breeds More Success?

Entrepreneurs usually lean toward one of two business mindsets – they’re either optimists who remain exceedingly positive about outcomes or they’re realists who downplay the good and see the bad as inevitable. When starting and running a business, does one inherently serve you better?

While studies show a strong link between successful entrepreneurs and optimism, having too sunny of a disposition can lead to delusions of success. It can spur people to overestimate the market and their abilities to execute, while being unaware of crucial facts or possible setbacks.

Entrepreneurs must learn to balance their inner cheerleader and realist, and it isn’t always a clear-cut line down the middle. Some business situations require more optimism than realism, while others call for a different ratio.

Here are some instances that outline when it’s best to have a glass-half-full or glass-half-empty mindset:

Leading a company – While realism should dominate a leader’s business viewpoint, a dash of optimism is required to move forward and stay upbeat about the future.

As a startup founder and CEO, my leadership philosophy is to be 60% realistic and 40% optimistic. My dominant realism allows me to stay humble and make decisions based on facts, rather than on gut feelings or aspirations. However, I also recognize that entrepreneurs don’t achieve success without taking risks, and my optimism enables me to take those risks and move forward despite uncertainties. It’s important to trust that all of your blood, sweat and tears will pay off, and what’s where optimism best serves weary startup entrepreneurs.

Allotting company resources – This requires equal parts optimism and realism. On one hand, you must be practical when setting a budget so you can allocate your resources effectively, negotiate better agreements with vendors and partners, and only shell out money when needed.

That said, you have to spend money to make money, and being too practical can hinder your growth. I’m still learning to take this advice myself, as I tend to be a little too economical with company resources. My investors regularly remind me that I need to spend more when building a business. I have to invest first before seeing a return and have faith those investments will deliver a return.

Correctly deciding where and how to spend your money calls for both rationality and optimism. You have to be generous but not reckless, practical but not stingy, and level-headed while also open-minded. It’s a tricky balance that can be achieved through market research, consulting with advisors and self trust.

Market testing your product – Entrepreneurs should be extremely realistic—even critical—when testing their product in the market. You may think that you’re solving a problem and convinced others will love your business, but don’t let your biases and wide-eyed optimism get in the way of evaluating your “baby.” In every instance, product development and design calls for critical thinking. Listen to feedback. Ask yourself if your product truly is making an impact. Actively look for flaws and holes, then iterate accordingly. Leave optimism out of this process.

Selling and marketing the business – Conversely, entrepreneurs can benefit from optimism when selling and marketing their products or services. Getting others to care or buy into what you’re doing is tough, and it’ll be downright impossible if you don’t have a positive, can-do attitude.  I had zero sales experience before becoming an entrepreneur, and dealt with constant rejection as the first salesperson in my company. That’s why my approach to selling today is 90% optimist and 10% realist (for actually figuring out the logistics of closing a business deal).

Even the biggest businesses have built a case for prioritizing optimism. In the 1980s, life insurance company MetLife spent millions training salespeople, only to see a significant number quit after a few years. The company brought psychologist Dr. Martin Seligman on board to improve its hiring process, and Seligman suggested that MetLife MetLife hire people based on their optimism.

MetLife then hired 15,000 consultants in two categories: one group was hired using the company’s standard screening tests, while the other group was comprised of those who failed the screening process but had high levels of optimism. The result? The optimists outsold the regular group by 21% in the first year, and by 57% by year two.

Managing your employees – Instead of managing people with an iron fist, I contend that keeping the team enthused unlocks their potential and helps them become the best versions of themselves. I try to remain optimistic, even when my team falls short of expectations. I always want to give them the chance to improve first.

About the author 

Daniel Latto

Daniel Latto is the owner and Director of The Daniel Latto Group, a Full Service Digital Marketing Agency.

Daniel advises businesses on marketing on Social Media using both Paid and Organic content. His top rated iTunes Podcast; 'The Wealth Creation Show' has hundreds of thousands of listeners around the world.

Daniel originally became Financially Free through property, with a Multi Million Pound Property porftolfio in Leeds.

He now lives in Spain on the shores of the Mediterranean.

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