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Are You Suited to Entrepreneurship

2 Types of Failure and How Your Business Can Weather Them

Successful high-impact entrepreneurs take calculated bets almost daily. High risks come with high rewards, which in turn are the result of understanding that failure is part of the equation.

Allon Raiz

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Beekeepers know that the more they get stung by bees, the less painful the wound will eventually become and the less their skin will react to the venom in the sting. A beekeeper once told me that although he has always had a deep respect for bees, he no longer approaches a hive with the same fear he once felt when he started his career.

The same is true for entrepreneurs. The more we experience failure, the less painful it eventually becomes. In a weird way, experiencing pain is expected as part and parcel of the entrepreneurial journey, just as being stung by a bee is expected by beekeepers.

I am particularly interested in the psychology of surviving failure and the relationship successful entrepreneurs have with failure — especially the ‘calculated bets’ they take daily.

Making Calculated Bets

Most entrepreneurs will have you believe that they spend a fair amount of time thinking deeply about the decisions they make before making them and they will refer to them as ‘calculated bets’ that are in line with their strategy. A ‘bet’, even a calculated one, has a good chance of not succeeding.

Related: RocoMamas Founder Brian Altriche On Fabulous Failures And Visualising Success

To move forward and succeed entrepreneurs have to make bets (decisions) daily. Some decisions will be the right ones and others will end up being wrong, but not making any decisions at all is not a luxury that an entrepreneur has.

Two types of failure

overcoming-failure

Failure can be categorised into multiple categories, but I would like to focus on only two categories — above the waterline and below the waterline.

Above the Waterline (ATW) Failure: When this type of failure occurs, when damage happens above the waterline, there is damage to the organisation but no water is taken on-board and the ship (‘business’) still remains afloat. Bear in mind that too many ATW failures will end up damaging the ship to such a point that it will eventually take on water and sink.

Below the Waterline (BTW) Failure: When this type of failure occurs, the ship takes on water and sinks (‘fails’). BTW failures occur when an entrepreneur’s bet encumbers enough resources (for example money, reputation, machinery, IP etc.) that the loss thereof would mean the business cannot operate effectively any longer.

The relationship with ATW Failure: As you might expect, entrepreneurs eventually develop a healthy relationship with ATW failure. Like the bee keeper, they gain confidence with the knowledge and experience that they have always survived tough situations, and built resistance to the pain they produce.

As a result of this we see an increased rate in ATW bets over time — relative to the business’s size. This curve starts to flatten as the SME approaches corporate size and it then becomes complacent or scared, which ends up leading to the number of ATW bets decreasing relative to its size. This is a sure sign of the beginning of the end.

The relationship with BTW Failure: The relationship with BTW failure is different. When entrepreneurs are in the start-up phase, most of the calculated bets taken are BTW bets. Taking on a new staff member early in the journey and finding out that they cannot do the job could be a BTW event. Losing a single client early (and unfortunately too often with those businesses a few years into their journey) can be a BTW failure. Game over.

As a business grows and builds assets and reserves, so too do the calculated bets move from the BTW category to the ATW category. In a classic supply/demand-type graph, the number of ATW bets increases over time and the number of BTW bets decreases.

The relationship entrepreneurs have with BTW failure remains the same over time. There is deep fear around the outcomes of BTW bets and entrepreneurs avoid them like the plague.

Related: This 1 Crucial Business Control Will Determine Your Success Or Failure

The BTW Dilemma

But, here is the dilemma. There is a thrill experienced when taking on a BTW bet that you can never achieve by taking on an ATW bet. There is an upside to winning a BTW bet that can never be gained from multiple ATW bets.

The media is full of examples of entrepreneurs who cannot resist this type of bet. Elon Musk may be a good current example of this. Cornelius Vanderbilt is a great example from the 1800s. After many years of hard work, he became a shipping magnate and his dominance in the industry was well established. But in his 70s, in a surprise move, he sold his shipping interests and took a bet on the railway industry.

On the one side of the BTW coin is the thrill; on the other side of the coin is the increased probability of losing everything. Those with the guts to take the BTW bet end up living with the sword of Damocles over their head, and those without the guts, live with the pain of boring incremental wins that do not move the dial too much.

Failure is an academic pathfinding exercise

Over my time spent with entrepreneurs, I have observed that those with the healthiest and most resilient relationship with failure have the closest thing to an academic lens on the process that you can find. They take those bets as carefully as their situation allows, and whether a failure or success occurs, they analyse the ‘why’.

Where did their decision-making serve them or fail them? What assumptions were true or false? Where did the execution fail or serve? Every failure is information of where not to move forward, every success is information on where to move forward. Failure and success are merely pathfinding inputs.

These entrepreneurs de-personalise the event (success or failure) as much as possible and see it as data that can be used for a better more successful next bet. This may be easier said than done. I have yet to meet an entrepreneur who never felt the sting of failure when they designed a product that failed, backed a team member that left for the opposition or invested in software that never worked.

All we can do as entrepreneurs is move slowly, over time, from a place of taking failure deeply personally to a place where we are coldly analytical and academic about the occurrence. And we might even fail at that.


TAKE NOTE

Businesses that don’t take bets become complacent which is a sure sign of the beginning of the end. 

Allon Raiz is the CEO of Raizcorp, the only privately-owned small business ‘prosperator’ in Allon Raiz is the CEO of Raizcorp. In 2008, Raiz was selected as a Young Global Leader by the World Economic Forum, and in 2011 he was appointed for the first time as a member of the Global Agenda Council on Fostering Entrepreneurship. Following a series of entrepreneurship master classes delivered at Oxford University in April 2014, Raiz has been recognised as the Entrepreneur-in-Residence at the University of Oxford’s Saïd Business School. Follow Allon on Twitter.

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Are You Suited to Entrepreneurship

Youthful Entrepreneurs Light The Way

If there’s one thing these go-getters have in common, it’s a determination to succeed. As we celebrate Youth Month, let’s learn from their example.

Morné Stoltz

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South Africa is already a very young country with 45.88 percent of the population under 24; by 2050, this proportion will have increased as the youth population is expected to double to 830 million. Already, 50 percent of the youth are unemployed, so it’s very clear that young people can’t sit around waiting for jobs to come their way – if they want a satisfying life, they will have to take charge of their own destinies.

This is just what these four inspirational young people have done

the-mouse-hole-imke-de-villiers1. Imke de Villiers

All of them started young. Imke de Villiers, the youngest of the four, is only eleven, but her first book, The mouse hole, is available on Kindle and in online stores. It is evident that a big part of her success is the lead given by her parents.

“At the beginning of the year, we all had to write down three goals for the year, and the book was one of those,” Imke says.

“I have very supportive parents. My sister and I are challenged frequently to think outside of the box. We tell stories, think of money-making ideas and always use our creativity.”

Related: 10 Young Entrepreneurs Under 30 Share Their Start-Up Secrets

2. Ingrid Moruane

Ingrid Moruane was also an early starter. “Since I was in high school, I’ve always seen myself as the boss. I’m a very driven person, and love working under pressure,” she says. Ingrid was fortunate to get some work experience as a project manager and optical assistant before following the advice of her then-boss to go out on her own, which she did in 2015. Now, aged 24, she will be moving out of her home office to premises in Joburg’s trendy Melrose Arch.

Ingrid’s business is Ing Management, and her concept is a unique one: she provides a portfolio of non-core services to government entities or corporates – event management, team-building events, catering, stationery and even office furniture. She uses trusted subcontractors to get the work done – what she provides is the vision and management. It is a turnkey service designed to remove a lot of detail off the to-do list of a corporate employee.

She sees funding as one of the biggest hurdles she has faced – and this is something one hears a lot about when talking to entrepreneurs. However, she pays tribute to the innovative approach taken by her bank, which stretches to introducing her to potential clients.

“More banks should do the same kind of thing,” she believes.

Believe in yourself

3. Sheldon Crabtree

deep-roots-night-market-sheldon-crabtreeSheldon Crabtree has a similar drive to succeed on his own terms. Although his parents sent him and his siblings to good schools – he is an alumnus of Pretoria Boys’ High School, which also produced Elon Musk – there was little spare money. “If we wanted personal things, we had to work for the money,” he says. As early as Grade 5, he would save his pocket money to buy sweets to sell at school; he also refurbished items for resale.

No surprise, then, that he decided not to go the route of getting a degree and a “safe” job, but rather took responsibility for his own life. He likes the idea of benefitting from his efforts.

Now aged 24, Sheldon is the proud owner of a woodworking business and the Deep Roots Night Market, which is held on the first Friday of each month in Groenkloof, Pretoria. The market provides not only gourmet food but also entertainment in a beautiful setting. Around 3 000 people attend each event.

Like Ingrid, he found start-up capital a major challenge – his solution was to take a part-time job that gave him some seed money and spare time. The woodworking, which began as a hobby, also provided some initial funding.

Related: Funding And Resources For Young SA Entrepreneurs

4. Zwelakhe Khuzwayo

Zwelakhe Khuzwayo, 26, is a great example of somebody who saw entrepreneurship as a way to make lemonade out of the lemons that life gave him! He lost his job but, nothing daunted, drew on the inspiration of his friend, Thulane Maestro Mathebula, to set up his own business making promotional videos and producing music.

“I’m one of the few people doing this kind of thing in the north-eastern areas of Pretoria, where I live,” he says. “I hope to gain recognition for the work that I do and hopefully my company will grow and expand.”

Start young

What all these inspiring young people agree on is the need for entrepreneurs to start young, and to believe in themselves.

Zwelakhe says that if you put in the work and effort, you will never go wrong.

For Imke, it is all about daring to be who you authentically are – you will always find a way to achieve what you want. “There are always other ways, other options,” she says.

Ingrid has stayed true to her childhood ideal of being the boss.

Sheldon (like Imke) says that parents have a big part to play. Being supportive is part of it, but it is also important to get their children on the right path. “Let your kids understand the power of creating their own wealth. On top of the set chores, let your kids do extra chores for money,” he advises. “Ask the school if they will be able to sell anything during break time, and make sure they get to grips with the social, financial and planning aspects of business.”

As the old saying has it, the child is the father or mother of the man or woman. That is very true – but it also helps if there is an adult helping the process along! As adults, let’s make sure we fulfill this role in the lives of our youth.

MiWay is an Authorised Financial Services Provider (Licence no: 33970)

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Are You Suited to Entrepreneurship

The Kindling Of The Entrepreneur Spirit

The principle of entrepreneurship is to observe challenges and find ways to improve them while simultaneously weighing up the relevant costs and benefits.

David Hatherell

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Many university students are funnelled into a conservative career such as a lawyer, engineer, actuary or accountant. This is often the popular choice and has the advantages of receiving stable income and benefit packages – it is a “safety net” career and offers the prestige of the title and security of the degree.

That being said, there are a lot of insights that you may miss if you use the narrow definition of what entrepreneurship means in the traditional sense – “starting your own business.” Entrepreneurship is more than that and, in my view, should be looked at using a three-principles based approach. The principle of entrepreneurship is to observe challenges and find ways to improve them while simultaneously weighing up the relevant costs and benefits.

Principle 1 – Adding Value Within Organisations

In my field, being an actuary with a data science background, you always need to find a better way of doing things. We need to use our resources, skills, and systems in a manner that would support our organisations to ensure that we add value to society.

Related: Why You Shouldn’t Quit Your Job To Start A Business

In essence, we need to use statistical or modelling techniques responsibly to ensure that three key focal points are met, which is easily adapted to becoming a viable entrepreneur, with a trusted reputation:

  • We do not mistreat or take advantage of consumers;
  • The results of initiatives or strategies are measured appropriately; and
  • There are no biases based on torturing data to get the results you want.

In addition to doing a good job, we needed to ensure that the work we do can be repeated, with ease and automated where relevant. This will ensure that our influence is long lasting and scalable, which is also critical to starting your own business or initiative. Most long-term solutions should also be flexible enough to add value to society, in whatever touch-points they are impacting.

Principle 2 – Benefitting Society

This is not about how much you give but rather what impact you have. We need to be honest with ourselves and determine appropriate measures to monitor success and what our ROI is aimed at becoming. This is often a challenge and is oversimplified or overlooked by many. For example, we may celebrate success metrics by reviewing how many scholars we fund or how much money was given to upcoming entrepreneurs.

This measure will have little benefit if all the scholars drop out or all entrepreneurial initiatives fail, we will essentially be celebrating an empty figure. The impact we have needs to be long-lasting and setting up society for success, with or without your continual influence.

Responsible and appropriate ways of measuring benefit will help add value to many initiatives. It’s a significant risk starting an initiative without any key performance indicators or measures of success, as you will have nothing to benchmark against and no measure to celebrate or punt as transparent and real success measures.

Principle 3 – Starting an Entrepreneurial Initiative

Some skills are necessary to start your initiative and working for a large organisation may help you build these skills or refine them. Key performance indicators are often used within larger organisations, and these companies may have proper structures in place to learn communication skills, the importance of planning, setting up budgets, pitching ideas or tracking results over time.

Related: How To Survive 150 Straight Rejections

As such, some young adults prefer entering the world of work as a first step and then using what they learn to start something new in the years to come. Whichever approach you take, ensure you are learning as much as you can and are open to mentorship, guidance and constructive criticism, we can’t possibly know everything, and there is always more we can learn and improve on.

Bringing It All Together 

Starting an entrepreneurial initiative will require a lot of bravery and resilience, an open mind, a good idea, relevant skills and support (financial and social).

What I admire, is that a foundation such as the Make A Difference Leadership Foundation has robust structures in place to support and encourage their scholars, should they wish to start an initiative in the future. And despite the prestige or the safety in obtaining a degree, the foundation inspires the scholars to follow their dreams, no matter how audacious they might be.

With the vision of the Make A Difference in mind, we believe that our scholars and fellows will be able to contribute and add value to organisations. Some may start their own initiatives and those who don’t will still use the principles of entrepreneurship in their daily lives. We all aim to continuously identify solutions that will add value to those around us.

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Are You Suited to Entrepreneurship

Going It Alone In Business? 5 Reasons That’s A Really Bad Idea

Being a solopreneur sounds great, but it’s actually a poor choice for your business.

Luis Congdon

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When we read about Elon Musk, Richard Branson, Arianna Huffington and all the other business giants – we immediately see a single champion. Much like old literature traditions where the hero triumphantly wins alone, our legends in business are often portrayed as the singular hero.

Steve Jobs reigning over Apple, Bill Gates towering over the giant that is Microsoft and Richard Branson stylised in his cape throughout the veins of Virgin – this kind of mythology and idealisation of the single hero in business has spurred a new wave of entrepreneurs who call themselves “solopreneurs.” We idealise the entrepreneur who does it alone and doesn’t need a team or support.

If you’ve been doing it alone or aspire to become a solopreneur, let me share with you five reasons to not be a solopreneur – and why the myth of any singular hero, whether in literature or business, is a misnomer and will only hold you back from having the most significant successes.

1. You’ll become a jack of all trades and a master of none

When you are a solopreneur, it’s practically impossible for you to master every skill needed to substantially grow.

Running a business takes a lot of capabilities: Mapping out content, creating it, sharing it, building a tribe, sending out emails, doing sales, attending events and growing the network, coaching, consulting and building out products is a small list of what a profitable business requires.

If you’re weak in some of these areas, it will hamper your business growth and fun.

Related: The Foundations Of Growth

Trying to do it all will soon see you doing low-level activities that pull you away you from making sales, doing projects for your high-end clients and doing the things that help keep the business growing.

2. You can’t scale or grow

business-strategist-jay-abrahamBusiness strategist Jay Abraham says there are only three ways to grow a business. You either get more clients, increase the cost of each transaction or you service your clients with more products. Two of these methods will mean more work.

If you increase clients or increase the number of products you sell, you will most likely need to increase your output.

Since there are only so many hours in a day, you’ll either become your own bottleneck and slow business down – or decide to outsource some of the tasks to your team and ensure business runs smoothly.

3. You won’t have time to do everything you want to do

When you’re overworked and doing it alone, you have no one to relieve the pressure. You have no team to support you, and you have no partners who can take some work off your plate. That means when there are emergencies, you won’t be available.

If a client needs you, your kids need you and a new client wants to pay you a lot for a new project – you’ll have to decide which is most important.

While having a team may not save you from making hard decisions, ideally you aren’t so thinly spread out that you find yourself saying no to more clients, family emergencies and serving current clients to the best of your abilities.With a team, you’ll be able to free yourself more, and you can say yes to more opportunities.

4. You’re more vulnerable to mistakes

Imagine if didn’t have spell check your documents and emails. Or what if this magazine didn’t have editors and any article got through? I’m sure you’d agree, the quality would be lost, and it’d likely result in many lost customers.

Related: The Case For A Business Partner Who Makes You Uncomfortable

In my life, I’m lucky to run a business with my wife and my team. Having a team helps me to not only “cut once and measure twice,” it also relieves some of the pressure to be perfect. It helps me to do my work, knowing my team will help me, and that inspires me. Doing it alone would be too stressful.

Having a team will allow you to call upon a support network, hand off jobs and have an extra set of eyeballs when you’re delivering a service.

If you’ve aspired to be like Elon Musk, Richard Branson, Arianna Huffington or any highly successful entrepreneur – take some time and study them and you’ll find they love building and being a part of a team. Soon you’ll find out all these legends have a team, an incredible support system, and they don’t do it alone.

5. You can’t ever sell your business

In most entrepreneurs’ minds, the idea of selling isn’t there until decades after starting the business. But, it’s something that if given the opportunity most of us would do.

Related: Why Partnerships Will Make Or Break Your Business

Even if you wouldn’t sell your business, isn’t nice to know that if you wanted you could take your business and get paid one lump sum equaling years of work?

Or if you don’t want to sell your business, maybe you want to step out of business but collect payments and keep it in the family – well, if you’re a solopreneur it’s tough to ever to work yourself out of a job.

This article was originally posted here on Entrepreneur.com.

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