Posts tagged ‘entrepreneur’
Why Entrepreneurs Take Risks
There is a high rate of failure for businesses. The statistics I have seen say as much as 90% of businesses fail in the first year (1). If this is so, then why would an entrepreneur believe it’s possible to be in the minority of enterprises that will succeed? Explanations that I have heard range from entrepreneurs must be delusional, to ‘they have the means’ to afford failure.
The rest of this blog will debunk the former (we all know that entrepreneurs are delusional). As for the latter, I won’t even spend much time addressing it, given that so many entrepreneurs have risked everything they own to start a business knowing there are no parents with deep pockets or trust funds to the rescue if they fail.
Of course, from an entrepreneurial standpoint, going into business is the very rational thing to do. Let me share with you some reasons that hard core entrepreneurs start businesses and what non-entrepreneurs can learn from it.
1) The risks are not that bad
If you consider that entrepreneurship is a journey, the risks are not that bad. In fact, the probability of success for an entrepreneur who has committed to the journey is 100%. Let me explain.
Suppose, you were given a coin with the following attributes: a) the coin lands Heads (success) 10% the first time you flip it, and b) on subsequent flips you can learn from your mistakes and improve the probability of success considerably. It is unfair to compare entrepreneurship to the rolling of dice. Most entrepreneurs learn from their first mistakes and improve their success rates on the next go round.
Before, I quit my full-time job to engage heart and soul into running my own venture, one of the best ideas I was given was that “entrepreneurship is a journey” and I should engage in it with no thoughts of turning back.
Lesson for non-entrepreneurs: Overestimating risk and underestimating future gains
I believe that by nature, human beings tend to overestimate the risk of losing what they have, and at the same time, underestimate the potential for future gains. This is probably why many put their money in the bank instead of investing in the stock market where history would indicate they are likely to achieve higher returns. Some don’t even put money in a 401(k) when they could get a guaranteed 100% return with an employer match. One of the attributes of entrepreneurs is that they are able to assess risk better than the average person.
Question: Are you evaluating risk properly?
2) Entrepreneurs are not afraid of losing immaterial assets
One of the reasons that people are afraid of going into business is the fear of what they might lose: Reputation – what would their friends think or say about them, or tangible assets such as money or the nice house in the suburbs. I call all of these immaterial assets. For entrepreneurs, their main asset is themselves and not the things they have.
So as long as there are humans and there are problems to be solved, an entrepreneur will create solutions for which people are willing to pay. Even if humans were able to solve all their problems, I am convinced that there will be entrepreneurs who would convince some to pay for problems that are inexistent but could materialize in the future.
Lesson for non-entrepreneurs: You are your greatest asset. Just like an entrepreneur, for all humans, their asset is not what they have; it is the person who created those assets in the first place. Are you spending time increasing the value of your assets through learning, meditating, going to retreats, keeping yourself in top condition both mentally and physically?
3) Entrepreneurs live their lives
There is no job advertisement for entrepreneurs. By definition, entrepreneurs are passionate about their ventures. They believe they were created to be entrepreneurs. The fact that they take the paths less traveled doesn’t bother them. What other people think is not going to stop entrepreneurs for doing what they love to do. There is a reason why many entrepreneurs leave very good jobs even when a promotion is imminent.
Before I started SciMetrika, I had an older friend who had a great job at IBM. He had an MBA with a technical background which was rare in those days. He believed that he would rise up quickly to the top. Deep in his heart, he wanted to be an entrepreneur and start his own business. The nice house and good pay kept him from ever following his passion. I knew I did not want to end up that way which is why I started SciMetrika in my early 30s.
Entrepreneurs would rather risk failure, living the life that was meant for them, rather than being successful doing a 9-to-5 job. (Of course, the greatest failure is to lose your soul and not be who you are meant to be.)
Lesson for non-entrepreneurs: Live your life with no regret. Deep inside, you have a passion and calling. Follow your passion and don’t let excuses like people, money, age (too young or too old) or background (education/race) stand in your way.
(1) Neil Patel. 90% Of Startups Fail: Here’s What You Need To Know About The 10%. Forbes Magazine; January 16, 2015. Accessed online on August 15, 2015 at http://www.forbes.com/sites/neilpatel/2015/01/16/90-of-startups-will-fail-heres-what-you-need-to-know-about-the-10/
Resources Needed Are Often Overestimated
“You can often do with the limited resources you have…”
To get most goals accomplished, there are 3 key elements: time, energy and resources. For example, to open a small business, no one would argue that success doesn’t come overnight or deny the fact that it requires a lot of work from the founder(s). It doesn’t hurt either to have access to some resources, chief among them CASH but also people resources (not necessarily employees; these can be advisors or mentors specially the ones doing it for free in the early part of a business). The same could be said of becoming an expert, a skilled artist or buying one’s first home.
We humans have a tendency to overvalue the resources necessary to achieve a goal.
Consider for example, the MessagePad by Apple and the Palm Pilot. It took $500M to develop the prototype for the MessagePad but only $3M for the Palm Pilot. Why did it take so much to develop the MessagePad compared to the Palm Pilot? (It think it may have something to do with Apple had that much money to spend).
I think this tendency to “throw” as much money onto something happens way too often with government agencies, non-profit organizations, companies, entrepreneurs, CEOs, students and in fact with most of us including this author. How many times have you heard people complain that they could have succeeded if they had more money or more connections?
The very fact that we see day in and day out start-ups with meager resources take over large companies that should have squashed them is a testament that time/energy can overcome what we might call lack of resources. Think of companies like Google, Amazon, Facebook, Netflix, Redbox, Apple, Microsoft…Each of these companies should have been eliminated by their better funded competitors: Google by Yahoo, Amazon by Barnes and Noble; Facebook by Google or any other established Internet company; Netflix by Blockbuster; Apple by Microsoft/IBM and Microsoft by IBM.
A sad consequence of this is that many worthwhile dreams die prematurely because of the illusion that resources are lacking. Energy (that we can call passion which in turns can fuel ingenuity and bring about hard work or time commitment) can often cure this little problem of so called “lack of resources”. When the dreams don’t die prematurely, their achievement might come at too high of a price because we want to “borrow” the resources we don’t have. While I don’t have the stats to prove it, I have no doubt that many entrepreneurs could have built their companies by bootstrapping instead of having to borrow or take on Venture Capital money as early as they did. (Just because you can get the money doesn’t mean you need to get it; just because you have the money doesn’t mean you have to throw it at the problem).
Some questions that might be useful to ask when going after a goal that might require significant resources:
- Have others achieved similar goals with limited or less resources than I have?
- Can I copy their models?
- Is it possible that I have more resources compared to others pursuing similar goals? Could that be a limiting factor (stymieing ingenuity for example)?
- What existing resources that I have that may be unique that I could leverage? For example, if I don’t have the financial resources, could I leverage my social capital (connections)? What do I bring to the pursuit of this goal that’s unique to me or my organization?
AyiPreneur 