I’ve barely taken ANY risk as I’ve pursued my entrepreneurial ventures. You can take this (almost) risk-free approach too if you plan carefully and deliberately.
First, let’s dissect the kinds of risk you typically take as an entrepreneur then we’ll get into making entrepreneurship (almost) risk-free.
There are a few discrete types of risk you’ll take as you set forth on your own: financial risk, career risk, brand risk, and lifestyle risk.
Financial risk: you have the potential to blow it all. Or you can simply run out of cash and face foreclosure. This happens when you build a business that can’t sustain the cash demands you’ll face as an entrepreneur. I recently explored this risk in the 4 traps that destroy entrepreneurs.
Career risk: you can derail your career progression because you spend a few years out of corporate America pursuing your dream of building www.BoogerSculptures.com (by the way, that URL is available in case you’re interested…).
Personal brand risk: you become known as the guy who “couldn’t cut it” as an entrepreneur.
Lifestyle risk: your family hates you because they forget what you look like since you’re working 94 hours a day. You also become such a stress bomb that everyone around you develops a nervous twitch.
Now that I’ve scared off the lily-livered posers from pursuing the entrepreneurial dream, I’ll tell all you real want-to-be-my-own-boss types how to de-risk entrepreneurship:
Step 1: Build Your Platform. This morning I gave a budding gonna-be-an-entrepreneur-some-day grad student bizarre advice: go get a job in corporate. He thought the Starbucks guy had spiked my coffee.
My reasoning? You’ll understand your future customers from the inside out. Many entrepreneurs sell their products/services to big companies. If you know how big companies operate, what their challenges are, and how to navigate the organization, your venture will be more successful.
I spent many years in corporate (too many… and I’m never going back). Now thoughtLEADERS provides services to some of the biggest companies in the world. My corporate background is tremendously helpful in that regard.
There’s an added bonus to having a solid platform. If your venture does fail, you have a solid resume and background to fall back on. You can go back to corporate and get another job if you’ve built up solid credentials before you set out on your own. This is how you solve for career risk and personal brand risk.
Translation for me: if thoughtLEADERS goes under, I have a strong enough network and solid enough career background that I can find another job. It might not be an optimal job but it will at least pay the bills.
Step 2: Build Your Cushion. The biggest risk you’ll face as an entrepreneur is you’ll run out of cash before you realize your dream. Running a business isn’t cheap. You have to make investments before they pay off. That takes cash and time (two things you might not have a lot of when you start out – again, check out the traps that destroy entrepreneurs and my perspective on cash).
Start building your financial cushion NOW. When I set out on my own full-time, I had built up some cash reserves to enable me to make it through 18 months of operations. I knew my cash burn and planned for it.
I also knew exactly how much runway I had to make this thing take off (as well as when I’d need to bail on it if it wasn’t working). Granted, I would have had to raid my portfolio if things got tight (which is never a good option) but nonetheless I had some cushion. This is a big part of solving for financial risk.
Step 3: Build Your Business. Sell something people want. Listen to the market (and remember: YOU ARE NOT THE MARKET!). If you can’t clearly identify the problem you’re solving AND explain how your solution creates value, you shouldn’t be starting a business.
You must have a clear product definition, sales plan, marketing approach, and all the other great things that go into a solid business plan. If you ever come pitch me your idea and say “my business is awesome because I have no competitors because no one has figured out how to make money in this market” I’m going to laugh at you. Where there’s competition, there’s demand. You just need to know how to compete BETTER than the other guys. Find that differentiated edge.
A solid business helps solve for financial risk as well as lifestyle risk. If your business is doing well, you don’t have to work so many hours to keep it afloat. You can also actually take a vacation or two.
Step 4: Build Your Transition Plan. When you start your business, you might want to do so while you’re still employed. I’m NOT advocating doing entrepreneurial things on company time. I am advocating doing it in the early mornings, lunch hours, weekends, evenings, etc. Write your plan. Do market research. Gather data and feedback. Pilot your product. Ensure there will be a market for your stuff before you turn in your resignation.
I ran thoughtLEADERS off the side of my desk for almost 4 years before I took the plunge full-time. And even when I did go “full time” I had a part time consulting gig lined up to generate cash flow while I focused a larger portion of my time to building my “real” business.
Now that the thoughtLEADERS business has been built, I’ve been working hard on another new startup called TiXiT off the side of my desk (which is a significant amount of time). I’m sure once that venture gets all the way off the ground I’ll end up pursuing another.
Step 5: Love What You Do. I know many of you secretly hate your jobs. You have bosses telling you what to do all the time. News flash: as an entrepreneur, NO ONE tells you what to do ergo you have to motivate yourself to work. It’s a lot easier to motivate yourself to drive your business when you can’t wait to get at it every day.
If you build a business you don’t love, you’ll fail. Period. I’m lucky – I know what I love to do. I love teaching. I love selling. I love thinking about leadership and talking to all sorts of brilliant people about it. I love pontificating on my blog. I DON’T WORK ANYMORE – it’s not work when you love what you do.
Be thoughtful before you head out on your own. Build. Plan. Think. Love. Your venture’s chances for success go up exponentially if you do. And a successful business is the best form of risk mitigation I can think of.