Trevor Noah once said you only know you’re growing if you cringe at the things you used to say. Well, I certainly cringe when I think of some of the things I’ve said in the past — especially when thinking of advice I’ve given about taking risks and following your passion.
“Jump off the cliff and build wings on the way down.” What a load of crap. Luckily I’ve seen the light.
Let’s deal with the concept of risk first: Only suckers and scions take unmitigated risk. If you’re a sucker, sorry for you. If you’re a scion (rich parents, rich spouse), well done for winning the lottery and having a safety net. But most people don’t have a safety net, which means most people need to plan very carefully to mitigate their risks when embarking on an entrepreneurial journey.
Remember Warren Buffett’s golden rules: Rule 1: Never lose money. Rule 2: Never forget rule number 1.
Hedge Your Bets
Before starting a business, make sure you have a deal in place that covers your downside. Now that sounds a tad difficult. How on earth are you supposed to ensure that when you flip a coin, heads: you win, tails: someone else loses?
No one said being an entrepreneur is easy. True, magic only happens when you’ve mastered the art of creative thinking. Of innovating. Of deal-making. Of ensuring you have a safety net before you take the plunge. An entrepreneur figures out a way to mitigate his downside, so even if the upside doesn’t materialise, he isn’t left as a red splat on the pavement.
Next time someone tells you to risk everything, add him to the list of people to ignore.
Solve A Problem
Now for the subject of ‘following your passion’. Don’t do it. Take coffee for example. Lots of people have a passion for coffee. Does that mean you should start a roastery? Or open a coffee shop? No. That way lies poverty.
An entrepreneur doesn’t follow her passion. She finds a problem that people are willing to pay her to solve. Then she solves it. With very few exceptions, the process of solving the problem will not instil deep joy and happiness. It will not be a passionate affair. That’s why no one has solved the problem yet…
Do you see? Money-making opportunities mostly lie in the opposite direction of your passion.
Find Your Mojo
By all means, chase your passion, but not for profit. Not only do you risk spoiling your love affair, but you will probably fail.
If you want to make money (and use that money to chase your passion), chase something that no one else wants to chase. Neither risk mitigation nor problem solving are fun or easy or nice. They require hard work, concentration and pain.
Most of the time, the only reason people are willing to do what it takes to be an entrepreneur is that they can’t get a job. If you are eminently employable, you will be employed. The path of a start-up entails too much hassle.
Luckily, the good news for us unemployable folk is that while our road won’t be littered with roses, at least we won’t be hooked to the most dangerous addiction in the world: A salary.
Becoming addicted to a monthly pay cheque will lead you down a road that makes you a docile, defenceless, plump sheep. There’s nothing wrong with being a sheep, provided you have a nice safe paddock.
You don’t want to be 55 and suddenly kicked out of the paddock, losing the intravenous drip that is your salary, and left to fight it out on your own in the wild. Rather take the plunge early. Position yourself by creating a safety net, de-risk your start-up.
You may not find a pot of gold in your first decade, but you’ll learn a treasure of skills that will stand you in good stead. Life is long. Take some risk, and love what you do. But don’t go all in, and don’t follow your passion. That way lies failure.
Read ‘Be A Hero’ today
Build Solid Back-Room Basics For Business Success
What do South African entrepreneurs really know about what goes on behind the scenes building of businesses?
South Africa has a vibrant start-up culture with great ideas starting out with a bang, but closing down with a whimper because entrepreneurs picture the glory at the destination, but not the nitty gritty of the journey to get there.
Be smart about scale
When I started out, I literally did everything myself. I negotiated and signed leases, I arranged the furnishing for our apartments and managed the interior décor process. When guests started using our apartments, I signed them in at reception, and then carried their bags.
At that stage, there was no money in my business to pay for attorneys, interior designers and decorators and there certainly wasn’t enough money for porters.
However, when we got to 70 apartments, it didn’t make sense for me to be a porter any longer, so I hired someone to do that job, explaining clearly what I expected of him. Before I did that, though, I spent time designing incentives for him so that he would be more affordable for me, and so that he could earn as much money as possible.
Related: Training Is A Two-Way Trick
Know your talents – and your limitations
There are certain things I’m really good at, but I know without a doubt that sales isn’t one of them – and without sales, you don’t have a business. I couldn’t afford a top-flight salesperson, but I knew that I could attract the right talent with the right business model. I set some high targets for Pamela Niemand, but offered her one third of the business if she met them. We both won: she earned a share in a successful, trend-setting business, and my trend-setting business became successful!
Use your skills – but know when to hand over
My background in corporate finance meant that I had all the accounting skills I needed when we first started out, but I knew that the time would come when I would need someone focused on that side of the business full time. Doing it all myself first meant that I could brief my first full-time accountant clearly and with a deep understanding of what would be required – and that I could help that person find and fix any challenges based on my experience.
In summary, my simple advice to anyone starting out would be to bootstrap your business yourself without investors or staff for as long as you can, but don’t over-extend yourself. Know when to delegate tasks away so that you can focus on what you’re really good at – but don’t do it before you have a solid understanding of what’s required. Know what you’ll never be able to do, and bring in that resource from the beginning – but do it based on performance-based incentives, so that your fledgling business doesn’t lose out if your early hires don’t perform.
The Myth About The Relationship Between Entrepreneurs And Taking Risks
This is the true relationship between entrepreneurs and the apparent illusion of risk.
“I can’t be an entrepreneur or start a business. I don’t have the appetite for risk.” This line is spoken regularly to brave few that leave the perceived safety of a job, take the plunge and venture into the unknown world of being an entrepreneur. However, there is a gross misunderstanding in the appetite for risk that entrepreneurs are believed to have innately inside of them.
The little-known truth is that the majority of entrepreneurs don’t like taking risks and according to Luca Rigotti and Mathew Ryan in their paper that explores a model for quantifying risk and its translation into enterprising action, the results were very interesting.
Risk is explained by these theorists as taking action where the outcomes are unpredictable as well the factors leading to that outcome are unknown. One of the theorists in this area, Saraswati, who coined the term “tolerance for ambiguity” has a more accurate description of what the outside world deems taking a risk.
In simple terms, entrepreneurs don’t go head-first into the shark infested water because they like the idea of danger and potentially being eaten alive; or the thrill of being able to say that they survived whilst others perished in a pool of maimed flesh. They carefully calculate that the sharks have been fed recently, some of the sharks are ragged tooth sharks that whilst looking like they are set to devour a human being, are actually incapable of opening their jaws wide enough to bite. For those sharks that still have space or who smell blood and can’t resist the urge to kill, the entrepreneur has a cage set up that he can retreat into quickly and a knife with which to protect himself.
Tolerance for ambiguity is the careful evaluation of what is known at the moment where a decision must be made and an open-mindedness for what is not known. This, coupled with the agility to change course when new information is presented, has earned the label of high risk appetite. The appetite is not for the risk, but it is the ability to move down a path, when all the information is not known.
I likened it to a person moving around in the dark holding a candle. The candle casts a light that illuminates a limited parameter around the person holding the candle. What is beyond the light that the candle casts, is unknown and potentially a risk. But as the person moves forward, the light reveals what was unknown and in the shadows. As the light reveals new information and new challenges added to what they have already learnt, the person can make better informed decisions. The tolerance is in not knowing what lies in the shadows yet to be illuminated by the candle and then the confidence in his or her own ability to act on what new information is discovered.
None of this behaviour is risky or irresponsible. There is careful consideration for what is known and a tolerance for what is unknown. And once there is more information available, a calculated next step is taken and more information is assimilated into what is now known. This is the true relationship between entrepreneurs and the apparent illusion of risk.
7 Skills Every Entrepreneur Needs To Adopt Today
Want to know what skills can help you build confidence and your business? Here are seven…
For some people, becoming an entrepreneur is as easy as stepping off a bus. They have a big idea, they bring it to life, they hire employees and the next thing they are in a building smothered in branding and living the business dream. For others, the idea and the passion are there but they are unsure as to how they can make these into a sustainable reality. Entrepreneurial spirit isn’t like instant coffee – you don’t add ideas and suddenly get all the skills you need to thrive.
Want to know what skills can help you build confidence and your business? Here are seven…
1. Believable vision
Make sure that your vision is believable and achievable. It has to live in the realms of possibility, not as a blue-sky idea that looks good on paper but wouldn’t work in reality. You need to be able to live this vision so make it realistic and achievable. This will not only keep you on track, but your employees as well.
2. Be inclusive
You need to ensure that every person who works with you feels as if they are part of your vision and understand it. They need to relate to where the business is going and how it plans to get there. Many leaders don’t understand why employees are not engaged with their business and it’s because many of them don’t actually understand what the business does.
3. Communication is critical
If you don’t have fantastic communication skills, then now is the time to hone them. When it comes to building employee morale, commitment and engagement, nothing works as effectively as constant communication. The same applies to client relationships. You need to repeat the vision and ethos of the company at every opportunity and you need to be part of the team that does this communication.
4. Be visible and transparent
You are communicating, now you need to make that communication genuine by being both open and clear. People respond incredibly well to transparency. They feel as if they are part of something that recognises their value and contribution and it fosters a more inclusive company culture. Often toxic cultures come about thanks to a lack of communication and visibility. People know when things are being kept secret and react negatively to it, regardless of whether they’re an employee, a customer or a manager.
5. Be practical
You aren’t going to build an empire in a fortnight so focus on a realistic and practical business strategy that has clear benchmarks and even clearer goals. Communicate these with the company and keep everybody on the same page. Practical and achievable means long-term success.
6. Build opportunities
As people become immersed in your company and part of its growth they will also need opportunities to grow. You need to tie their careers to the business and create opportunities for them.
7. Be human
It takes people to build a culture, a company and a future. It’s essential that you are human in your interactions and your treatment of others. The impact that a down to earth and authentic attitude can have on a company is extraordinary.
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