Illusions of invulnerability – to feel somehow bulletproof – is often attributed to adolescents. In truth, more than 80 percent of the population have an optimism bias; we don’t believe bad things will happen to us.

It is a luxury that business owners cannot afford to entertain.

Plagues may sweep the world. Our friends and colleagues may collapse with heart attacks, strokes, brain aneurysms and other horrible things, but somehow, most of us believe ‘it won’t happen to me’. 

Professor and Cognitive Neuroscientist at the Department of Experimental Psychology, University College London, Tali Sharot, says there is a tendency to overestimate our chances of experiencing good events in life and to underestimate our chances of experiencing bad events. 

“We are more optimistic than realistic. Without optimism bias, however, we would all be slightly depressed,” Sharot says. “Optimism is not just related to success. It leads to success.”

While anticipating good things in the future and expecting the best is a good thing, the statistics tell us that six out of 10 men and five out of 10 women will experience a traumatic event in their lives. 

For business owners who want to succeed through the ups and downs, positive thinking is a good thing, but not at the expense of being realistic.

It is better to take steps to maintain as much control of our lives and businesses as possible than to go through life merely believing that it is all under control.

How to do it

If you want to prosper and protect your cashflow and business just in case, embrace your optimism bias – but adjust a parachute to your back.

  1. Spread the responsibility

A business that relies on one key person is vulnerable at several levels, not least cashflow. If you struggle to take time off because your staff need you, it is time to loosen the reins and spread the responsibility.

One tactic may be to identify a key person – or even a junior partner – in the business and begin delegating responsibility to that person. Spread the load.

2. Take out insurance

Insurance can be a costly expense for a small business, particularly loss of income insurance. Life insurance will protect your family if you die; trauma insurance may help protect you and your business if you become incapacitated at some point – which is a far higher possibility than your dying.

Talk to your insurance broker about what options are best for you, but don’t leave it to chance.

3. Build a business that can function without you

Self-employment, in many instances, is a risky business. While it may give you the lifestyle and the income you desire, you alone are vulnerable – not to mention that you will struggle to realise any value out of the business when it comes time to retire.

Aim to build a business that you can ultimately sell, which means it must be able to run independently of you. Policies, procedures, outsourcing and possibly hiring staff further down the line will be a necessary part of achieving a self-sufficient stand-alone business . 

4. Explore passive income generation

Regardless of whether or not you sell expertise, services or products, you may be able to construct a process and portal – such as an eCommerce site – that enables sales to happen without direct input from you. 

When talking about how to apply optimism bias correctly, Sharot uses the analogy of penguins jumping off a cliff in the expectation that they can fly.

“If you are an extremely optimistic penguin that jumps off a cliff blindly, believing you will soar like an eagle, you might find yourself in a mess when you hit the ground. But if you are an optimistic penguin who believes you can fly but adjusts a parachute to your back just in case things don’t work out as you planned, you will soar like an eagle, even if you are just a penguin,” Sharot says.