by Tom Panaggio, author of “The Risk Advantage: Embracing the Entrepreneur’s Unexpected Edge“
Imagine you stand at the edge of an enormous cliff, a parachute strapped to your back. To your right is a winding staircase with a sturdy handrail. There are only two ways off the cliff — jump or take the stairs. If you jump, once you reach the bottom, you’ll be awarded the exact amount of money you and your family need to live a happy and comfortable life. If you take the stairs, you’ll reach the bottom and walk away — nothing gained, nothing lost. Will you take the risk knowing there’s a slight chance the parachute won’t open? Or will you take the safe way out, knowing a life of mediocrity awaits?
This is the dilemma entrepreneurs face every day.
Risk is eternally linked to opportunity. There is nothing wrong with taking the safe way out — millions make that choice — but successful entrepreneurs are a different breed. They are professional risk takers and they need to be willing to strap on that parachute every day.
Though we typically associate risk with the initial leap-of-faith decision to start a business, to achieve real success, one must consistently embrace risk every day, and not just on the business’s first day.
A willingness to take risks separates leaders from the rank and file. If you lose the spirit of risk, the business begins to decay. From startup through the last sale, the spirit of risk is the unexpected edge for every business.
Read on for an overview of the risks you must accept if you want to build and run a sustainable, profitable business:
Be the pig.
Are you a chicken or a pig? I frequently headr one of my business partners, Phil Turk, ask this odd question. One day, I asked him what it meant. Phil explained, “Think about a bacon and egg breakfast. The chicken is involved, but the pig is committed.”
Lending an egg to a breakfast meal, the chicken participates but sacrifices nothing. However, the pig literally has skin in the game. He is most definitely fully committed. Following your entrepreneurial dream by giving everything you have is like being the pig: You have to be fully committed. An entrepreneur’s commitment is personal; it includes an investment of money, time, and loss of opportunity from forgoing other opportunities. The life of an entrepreneur is not glamorous; it can be stressful and it swallows up your personal time. Once you decide to jump, if you want any chance for success, you need to go all in just like the pig.
Finance the dream yourself.
Giving up your hard-earned money is the ultimate risk. To pour life savings into an entrepreneurial pursuit is like walking the tightrope without the benefit of a safety net. It takes courage. Even though the commitment is substantial, it’s necessary to motivate you to keep pushing forward. Money buys resources, technology, and manpower — all critical elements in helping a new business succeed.
If all capital investment is from your coffers, and not from outside sources, then you are truly committed. Of course, you might have to find a source for additional financial support, which means either giving up a piece of your dream in the form of a partnership, or taking on debt responsibility.
Building a successful business when money is tight is a true accomplishment. The committed entrepreneur doesn’t allow a tight money situation to stop her. True entrepreneurial spirit promotes self-reliance and the willingness to find the money.
Sacrifice your most precious possession: time.
When you pursue a new enterprise, one resource that cannot be reimbursed, borrowed, or saved in an account for later use is time. Time is the most perishable resource of all. Time is finite; it’s more precious than money and more costly to waste.
Losing time is the risk you take going in. How you invest your time is a test of your resourcefulness. Where is the best use of one’s time? How much time must you invest? Too little means less than a full effort. If there is too much, then other life segments suffer. The good news is eventually you will learn to navigate these challenges.
Don’t be a non-decider.
In business, you need to decide over and over again. The first decision you make is to jump in and pursue an entrepreneurial dream, but decisions don’t end there. And every time you make a decision, there’s a risk: These are the risks of failure, not being accepted, and making wrong choices. Don’t let that stop you.
By making decisions, whether right or wrong, you are progressing and moving from where you were to something different. When making no decisions, nothing happens. You’re in stagnation, and your business will suffer. Despite this, there are people who refuse to make decisions. You can’t be an entrepreneur and avoid decision making. You make your move and then embrace the risks that come with that move.
Change or die.
Businesses are like sharks: They have to keep moving, or they will die. The rule is simple: Businesses must progress, and progress requires change. In the business world, fear of change probably is the single biggest obstacle businesses need to overcome to meet the evolving marketplace challenges. What makes embracing change even more difficult is that a business must be willing to simultaneously change internally and externally to keep progressing and remain competitive.
Internal change happens within the business walls and is not necessarily customer facing. Internal change can be organizational; there are changes in personnel, management, department, and staff reorganizations. It also refers to processes or systems, changes in attitude, and the business personality. While these three characteristics can and do change independently, they also can be linked, thus resulting in dramatic transformation.
External change is always customer facing; it’s most noticeable to your customers and competition. Innovation, an external change, brings a new competitive edge to your business by introducing products or services that increase the value of a customer’s experience with your organization and is announced in the marketplace through branding and marketing.
Forget the “If I had…” excuse.
Some entrepreneurs are like a little boy standing with his nose pressed to the candy store window, hoping and thinking, If I had a couple of pennies, then I could buy some candy and everything would be great. Sub in new technology, a bigger store, a larger advertising budget, and on and on, for those two pennies and you get excuses made by struggling entrepreneurs everywhere. For example, If I had the latest CRM software, then everything would be great. Then, I could really grow my business.
Entrepreneurs must be self-reliant. You must get comfortable looking to yourself as the solution, not other people or objects. I have heard all the ‘If I had’ excuses over the years. Unfortunately, this way of thinking is based on false reality, because the road to success is through action, not tools or accessories.
Expect to fail.
Starting and building a business is like being a child learning to ride a bike. To master the skill of riding a bike as well as learning to be a successful business leader, you must first embrace the risk of failure and expect to fail. It is rare that someone can expect to accomplish either of these skills without a fall or two, and just as a child gets back up from a fall when learning to ride a bike, you have to be resilient to the pain and embarrassment of failing and keep pushing ahead. What both child and entrepreneur must realize is that failure is not defeat but a signal that a change is necessary.
By expecting to fail, we accomplish two very important objectives. First, we are willing to embrace risking failure by doing something to keep our dream moving forward rather than avoiding risk and doing nothing. You can’t hit a baseball unless you swing the bat. Second, we set the proper expectation mentally that we are planning for the best but preparing for the worst. This is not a defeatist attitude, but it gives the opportunity to prepare for recovery and make another attempt.
Spend money on marketing.
Marketing is key to building a successful business. But it is also something that many entrepreneurs are loath to spend their money on. Instead, they offer these handy excuses: “I tried it once and didn’t get any response, and so I stopped.” Or, “There’s just no money for marketing this quarter. Maybe I’ll try something next quarter.” It’s no doubt that it is hard to know what consumers think and what their day-to-day needs are, but a business void of a long-term and consistent marketing effort is doomed.
At RME, our motto was very simple: He who markets most wins. In fact, we used marketing risk as a competitive edge against our competitors. Anyone wanting to become a potential competitor had to be willing to match our investment and commitment, and just doing a little marketing wouldn’t have been enough to catch us.
Competitors were forced to divert resources and money from other areas of their business to keep up with RME’s aggressive marketing strategy. This limited their ability to expand and innovate. The irony is, competitors weren’t willing to embrace the same risk of marketing that they were trying to convince their prospects to do, and they also weren’t willing to embrace it to stay competitive with RME.
Accepting marketing risk also means recognizing that some degree of failure is both inherent and necessary to find your right path. We knew that our marketing message was going to be received by some who were not ready to buy. Therefore we committed to a consistent, ongoing strategy to ensure that our message got in front of prospects when they were ready to buy. You can’t accomplish this by sending a single message and hoping prospects individually remember you and then respond months later.
Get up close and personal with customers.
Shortsighted business leaders assume that customers have unreasonable expectations or their demands will increase once you open the door of a relationship. After all, what if you start talking to them and they start wanting better pricing, extended credit, or other special considerations.
The truth is customers require consistent care and investment. You must risk investing in the necessary resources to draw your customers closer. You start by understanding the customers’ experience, and then continue maintaining a consistent line of communication throughout your relationship.
Sure, as a small business, money is tight, but the simplest solutions are just as effective as grand gestures. A short thank-you note after a customer places an order, whether it is done via email or by sending a handwritten thank-you card by regular mail, is an easy way to start building personal relationships with your customers. Send birthday cards or holiday cards. Call them with information or updates on products they’ve purchased or have asked about in the past.
To a small business owner who has a small number of customers, losing just one customer has a significant impact on organizational health. If you lose a customer due to price or other circumstances beyond your control, then fine. However, losing a customer because they felt unappreciated or underserved is inexcusable; it indicates serious flaws in your internal business processes that lead to additional losses. The easiest way to avoid customer churn is by continuously reaching out and communicating; the sales process never ceases.
The road to entrepreneurial success is not an easy one. You can’t simply take the stairs to a successful business. To be a successful entrepreneur, you have to recognize that taking advantage of opportunities — big and small — means embracing the risks that come with them. And then you have to be willing to embrace those risks day in and day out. Keep that parachute handy.
Tom Panaggio, author of “The Risk Advantage: Embracing the Entrepreneur’s Unexpected Edge“, has enjoyed a 30-year entrepreneurial career as cofounder of two successful direct marketing companies. In 1983 he cofounded Direct Mail Express (DME) in Daytona Beach, Florida, with his siblings Mike and Kathy. As CEO of spin-off RME in Tampa, Florida, Tom headed a company that created the most effective lead-generation program in the financial services industry.