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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

(Podcast) Being An Entrepreneur Is Painful

There is a pain attached to running your own business. It’s time to discuss how tough it is – address the reality and you might just be one of the successful few.

Nicholas Haralambous

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Entrepreneurship is fun. But on the whole, running a business is hard. Far fewer business owners succeed than fail. Statistically your business is going to fail. Those are the hard numbers.

There is a pain attached to running your own business. It’s time to discuss how tough it is – address the reality and you might just be one of the successful few.

Listening time: 5 minutes

Related: (Podcast) Playing To An Audience Of One

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Are You Suited to Entrepreneurship

3 Dangerous Entrepreneurial Myths You Need To Ignore

This terrible advice won’t actually get you anywhere.

Entrepreneur

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Entrepreneurial Myths

We’ve all heard the numbers about how hard it is to build a long-lasting business. While there are many factors at play to get there, without effective marketing and sales a business cannot survive.

Unfortunately, there is a multitude of dangerous and destructive marketing advice swirling around the heads of vulnerable entrepreneurs. Like vultures seeking their next meal, “gurus” pontificate nonsense that these hard-working business owners follow, only to discover that what they tried doesn’t work.

Often, once the damage is done, it is too late for them to do anything else about it.

If you want to not only survive, but thrive, here is some of the terrible advice you need to start ignoring:

1“You need to be everywhere”

I’m sorry, but how do these people sleep at night without the use of narcotics? “Experts” spew out dribble to make headlines saying you need to get on Snapchat, get on Periscope, do YouTube Live … be everywhere! They’ll say you need to get on this platform or that social media network. Oh, and use LinkedIn Live! And make sure to post on Instagram three times a day and Facebook twice a day. And don’t forget those Facebook Lives. Make sure to do them every day.

Related: The Journey Of Entrepreneurship: How The Tough Get Going

ACK! Just writing that paragraph stressed me out. How the heck are you supposed to be on all of those channels, never mind doing it all effectively, and still run your business? Of course you can’t. And you shouldn’t. (Unless self-torture is your thing, in which case have at it. There are books about that, but I’m not giving any titles because I’d have to Google them and then I’d be retargeted by the ads and that would just be gross.)

It is impossible to spend even half an hour on each major network and still get any work done. Forget about focusing on measurement, profit and return on investment. They don’t mention that on purpose, because then these crazy-pants suggestions would really make no sense. But, then these “experts” would stop making the headlines, so they keep serving up spoiled advice for the poor folk who chow down and then get sick on it.

Don’t allow yourself to fall victim to their plots of deception. Demand strategies that value your time and produce results in a significant and measurable way quickly.

2“It takes money to make money”

cash-flow-management

I didn’t take the easy way out. I am part of a group of scrappy entrepreneurs who have a lot of hustle and heart and little/no/negative funds. I didn’t come from family money, and the big banks certainly weren’t lending to businesses like mine.

The only way I was going to get a big pile of cash was if I won the lottery. And since I’ve only played about four times in the last decade, the chances of that happening were slim. What I had to find was the same thing you most likely want – a solution to predictably bring in customers when there is no marketing budget to play with.

3The Schmo-bags

The worst are who I call the “Ferrari Marketers.” They rent a sportscar for an hour or two, hang out in front of it and then sell us shiny object strategies that they haven’t even used in their own business.

Related: 6 Timeless Strategies That Drive Successful Entrepreneurship

They are abhorrent, hideous and dangerous. Not only are they crooks stealing the money of the people who are seeking a solution from them, but they may prevent really talented people who have a gift/service/product/offer to share that can help someone else from ever reaching them.

Did I mention they suck?

But, once you discover a game-changing system, you are responsible for implementing it. You can’t be distracted by shiny objects any longer.

As Jack Welch says, “Good business leaders create a vision, articulate the vision, passionately own the vision and relentlessly drive it to completion.”

Don’t allow yourself to be enticed or distracted by fads or the “latest and greatest/not greatest” new social media strategy, channel or tactic.

Once you uncover how to truly get results, be strong-willed and stubborn. Repel any idea, strategy or initiative that requires you to keep spending money to make money. If you keep throwing dollars and time at a goal, hoping and wishing that it will work, yet not tracking or measuring the results and scaling accordingly, then you cannot expect results.

Start measuring, tracking and demanding results from your time and money, rising above others and landing in the successful minority that thrives instead of survives.

This article was originally posted here on Entrepreneur.com.

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Are You Suited to Entrepreneurship

5 Mindset Changes You Must Make When Going From Employee To Entrepreneur

As one prominent author wrote, “Entrepreneurs don’t finish when we are tired. We finish when we are done.”

Sujan Patel

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Thousands of people dream of the day they can quit their jobs and escape the 9-to-5 life. In fact, Gallup found that 87 percent of the employees it surveyed worldwide did not see themselves as engaged.

But quitting your job and starting your own business is only half the battle. You need to prepare to be an entrepreneur. Besides getting your finances in order and having a plan in place, you also need to prepare your mind.

Your habits dictate your success, and if you’re still stuck in that 9-to-5 mindset, your endeavors will fail. You must adopt an entrepreneurial mindset and start thinking the way the world’s top leaders do.

Being an entrepreneur is very different than being an employee, and the way you envision it may be completely off base. Here are five changes you must make to your thinking in order to prepare yourself for the realities of being an entrepreneur.

1Train your mind to think outside the box

Once you leave your office job, you’re no longer confined by corporate life. That means you need to open your mind to new possibilities – possibilities that may not have been an option in your old life.

Related: For Shatty Mashego Success Lies In Maintaining A Positive Mindset

In an article for TIME magazineWarren Buffett, CEO of Berkshire Hathaway, said, “People will always try to stop you doing the right thing if it is unconventional.” In short, others may not see your vision, but you can’t let that stop you. You need to be creative with your business, offer something new and be different to be successful.

2Develop both short-term and long-term vision

Albert Einstein once told the New York Times, “A new type of thinking is essential if mankind is to survive and move toward higher levels.”

That new type of thinking needs to be focused on a strategic goal. You must have a vision for your company – an idea of where you’re going and how you’ll get there.

As an entrepreneur, you are the leader of your company, and your team members are looking to you to show them the path to success.

What’s your plan? You should be able to see the big picture as well as all of the steps it will take to reach your main goal. Then, you must communicate that vision to those on your team and ensure they each understand their individual roles in the plan.

3Let it all fall on your shoulders

stress-on-shoulders

Becoming an entrepreneur can be scary. Your success is now completely dependent on the work that you do. You can no longer fall back on a salary or benefits.

As an employee, if you had a bad day at work, you were still paid your salary, regardless. But as an entrepreneur, if your business isn’t successful, you won’t make any money. Plus, you now have others relying on you for their livelihood.

Ryan Farley is a typical example of corporate employee-turned-entrepreneur, quitting a fast-paced finance job to start lawn care marketplace LawnStarter Lawn Care. “I was used to working extremely long hours in the corporate finance world,” Farley told me. “I thought that would have conditioned me well, but nothing can prepare you for this amount of stress.

“It’s pretty common for founders to have the stress get so bad it affects your physical and mental health,” Farley continued. “But you have to press on, and you’re better off for it.” Prominent entrepreneurs like Brad Feld and Mark Suster, have expressed similar sentiments.

Working for yourself also means you need to be your own motivator. You no longer have a boss hounding you to get your work done. You need to stay organised and focused, and you’re going to have to be comfortable with hard work and long hours.

Related: 8 Mindsets That Will Set You On The Path To Success

4Get ready to be a jack of all trades

As an entrepreneur, you can’t say “That’s not my job.” Every job is your job now. There’s no one else to pick up the slack but you. You need to make sure everything in your business continues to run on track, and that may mean doing work you aren’t used to doing. You may need to be the accounting department, IT, marketing and more in addition to leading your company.

Entrepreneurs wear many different hats and are constantly learning new skills and working hard. If you think becoming an entrepreneur means you get to sit back and kick your feet up, you’d better stick to your day job.

As entrepreneur, author and investor Robert Kiyosaki has written on Twitter, “Entrepreneurs don’t finish when we are tired. We finish when we are done.”

5Be flexible, focused and positive

Attitude is everything in business. You can’t let challenges get in the way of your dream. Entrepreneurs need to be optimistic and stay focused on their goals. Your passion must drive you.

Related: An Entrepreneurial Mindset – Why And How To Develop One

As Steve Jobs once said in an interview with the Smithsonian Institution, “Unless you have a lot of passion about this, you’re not going to survive. You’re going to give it up. So, you’ve got to have an idea, or a problem or a wrong that you want to right that you’re passionate about; otherwise you’re not going to have the perseverance to stick it through. I think that’s half the battle right there.”

This article was originally posted here on Entrepreneur.com.

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